Question

AS in the Short Run (Range 2 of AS):

There is an increase in U.S. wealth

Question 1)

     a) AD increases

     b) AD decreases

     c) AS increases

     d) AS decreases

Question 2)

     a) GDP growth rises

     b) GDP growth falls

     c) GDP growth remains unchanged

Question 3)

     a) unemployment rises

     b) unemployment falls

     c) unemployment remains unchanged

Question 4)

     a) inflation increases

     b) inflation decreases

     c) inflation remains unchanged

Answer 1

1) AD increase because increase int he income leads to more consumption.AD curve right shift

2) GDP rise consumption increase results in the increase in investment and output and employment level hence GDP increase.

3) Unemployment falls

because consumption increse investment increse to produce more goods employer higher more labors.

4) Inflation increases

The increse int he demands int he economy leads to rising in inflation because of supply of goods overnight possible.