AD-AS Model

What does the AD-AS model stand for?

• The demand and the supply model.

• The aggregate demand and aggregate supply model.

• The Average demand and average supply model

• The accumulated demand and accumulated supply model

Why is the AD curve downwards sloping?

• Because the quantity demanded decreases when the price increases.

• Because of the wealth effect, the interest rate effect, and the substitution effect.

• Because when the price increases, households will want the buy the alternative products.

• Because when price increases the real GDP will decrease.

How are business cycles reflected in an AD-AS model?

• The back-and-forth shifting of the AD curve reflects the business cycles.

• The back and forth shifting of the AS curve reflects the business cycles.

• An AD-AS model cannot reflect the business cycle.

• The increases and decreases in government spending reflect the business cycle.

What will cause the AD curve to shift?

• Changes in the household consumption C.

• Changes in the business investment I

• Changes in the net export (X-M)

• All of them

What will cause the AS curve to shift?

• Changes in the technology.

• Changes in the available resource.

• Changes in the Tax regulation

• All of them

The AD-AS model in the graph says

• the economy is experiencing a recession.

• the economy is experiencing high inflation pressure.

• the economy is in a normal situation.

• the economy is having an unemployment problem.

The AD-AS model in the graph says

• the economy is experiencing a recession.

• the economy is experiencing high inflation pressure.

• the economy is in a normal situation.

• the economy is having an overheating problem.

The AD-AS model in the graph says

• the economy is experiencing a recession.

• the economy is experiencing high inflation pressure.

• the economy is in a normal situation.

• the economy is having an overheating problem.

Why the AS curve has three ranges?

• It is used to reflect three different economic situations: economic recession, economic overheating, and the normal situation.

• Because the Keynesian economists believe that the price will not adjust to the changes in aggregate demand.

• Because economists of the classical school believe that the price will adjust to the changes in aggregate demand.

• Because the government will always want to achieve full employment.