Aggregate Supply and Demand Dynamics

The video tutorial explains macroeconomic equilibrium, determined by the interaction of aggregate supply and demand. It explores how shifts in aggregate demand, such as changes in interest rates or government spending, affect inflation, real GDP, and employment in both the short and long run. The tutorial also covers the impact of shifts in aggregate supply, highlighting the benefits of policies that boost supply, like education and investment, which can control inflation and increase GDP without the trade-offs seen in demand-side policies.

What determines macroeconomic equilibrium?

• The employment rate

• The level of government spending

• The interaction of aggregate supply and demand

• The rate of inflation

What is a potential cause of a rightward shift in aggregate demand?

• Increase in taxes

• Cut in interest rates

• Decrease in consumer confidence

• Reduction in exports

In the short run, what is the effect of a rightward shift in aggregate demand on inflation?

• Inflation increases

• Inflation remains unchanged

• Inflation decreases

• Inflation becomes unpredictable

What could cause a leftward shift in aggregate demand?

• Increase in exports

• Cut in government spending

• Increase in government spending

• Increase in consumer spending

What happens to real GDP in the short run when aggregate demand shifts left?

• Real GDP increases

• Real GDP decreases

• Real GDP becomes volatile

• Real GDP remains unchanged

How do rightward shifts in aggregate supply affect price levels?

• Price levels remain unchanged

• Price levels increase

• Price levels decrease

• Price levels become volatile

Which policy is beneficial for boosting aggregate supply?

• Cutting interest rates

• Investing in physical capital

• Reducing education funding

• Increasing taxes

What is the impact of a rightward shift in aggregate supply on GDP?

• GDP decreases

• GDP increases

• GDP becomes volatile

• GDP remains unchanged

What is a consequence of a leftward shift in aggregate supply?

• Increase in employment

• Increase in price levels

• Decrease in price levels

• Increase in real GDP

What long-term effect can a sustained leftward shift in aggregate supply have?

• Increase in productive capacity

• Decrease in productive capacity

• No effect on productive capacity

• Increase in employment