Which component of real GDP fluctuates the most over the course of the business cycle?
29.2 Aggregate Supply Over the course of a business cycle , the quantity of labor employed fluctuates the most . 2) What factor changes the quantity of real GDP supplied and results in a movement along the AS curve?
Which of the following is most commonly used to monitor short run changes in economic activity?
a. Most economists use the model of aggregate demand and aggregate supply to analyze short – run economic fluctuations.
What is a likely reason for the decrease in real GDP during a recession?
A recession is defined as a period of falling GDP and rising unemployment . GDP will fall if there is a decrease in aggregate demand or a decrease in aggregate supply.
What happens to the price level and real GDP in the short run?
The short – run curve shifts to the right the price level decreases and the GDP increases. When the curve shifts to the left, the price level increases and the GDP decreases.
Which component of GDP is the smallest?
Can monetary policy be implemented quickly?
cannot be implemented quickly , but once implemented most of its impact on aggregate demand occurs very soon afterward.
Which of the following other things the same would make the price level decrease and real GDP increase?
Which of the following , other things the same , would make the price level decrease and real GDP increase ? output is higher and prices are lower.
Does GDP rise or fall during a recession?
A recession is a period of negative economic growth . In a recession , we see falling real GDP , falling average incomes and rising unemployment.
Which of the following shifts the aggregate demand to the right?
The aggregate demand curve, or AD curve, shifts to the right as the components of aggregate demand —consumption spending, investment spending, government spending, and spending on exports minus imports—rise. The AD curve will shift back to the left as these components fall.
What happens when GDP decreases?
If GDP is slowing down, or is negative, it can lead to fears of a recession which means layoffs and unemployment and declining business revenues and consumer spending. The GDP report is also a way to look at which sectors of the economy are growing and which are declining.
What can exacerbate recession?
A rise in interest rates – increases the cost of borrowing and reduces demand. Fall in asset prices – negative wealth effect leads to less spending. Fall in real wages – e.g. inflation outstripping nominal wage increases. Fall in consumer/business confidence also exacerbated by the negative multiplier effect.
What stage of the economic cycle are we in?
Using the current economic data, it is easy to identify that we are in the expansion phase of the business cycle . The current debate is not which phase we are in but where we are in the expansion.
What is the relationship between price level and real GDP?
The intuition behind the real wealth effect is that when the price level decreases, it takes less money to buy goods and services. The money you have is now worth more and you feel wealthier. So, in response to a decrease in the price level , real GDP will increase.
What causes real GDP to increase?
Economic growth means an increase in real GDP . Economic growth is caused by two main factors: An increase in aggregate demand (AD) An increase in aggregate supply (productive capacity)
How do we get a long run as curve?
The long run aggregate supply curve (LRAS) is determined by all factors of production – size of the workforce, size of capital stock, levels of education and labour productivity. If there was an increase in investment or growth in the size of the labour force this would shift the LRAS curve to the right.