Question

​For a given aggregate supply curve, an increase in aggregate demand will: a. ​increase real GDP....

​For a given aggregate supply curve, an increase in aggregate demand will:

a.

​increase real GDP.
b.

​decrease real GDP.
c.

​increase the real exchange rate.
d.

​decrease the real interest rate.
e.

​decrease the price level.

​Given an aggregate supply curve, a decrease in aggregate demand will:

a.

​increase the real interest rate.
b.

​increase real GDP.
c.

​decrease real GDP.
d.

​increase the price level.
e.

​decrease the real exchange rate.
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Answer #1

Answer : 1) The answer is option a.

If aggregate demand increase then the aggregate demand (AD) curve shift to rightward. So, for a given aggregate supply curve if aggregate demand increase then the AD curve will shift to rightward. As a result, the real GDP will increase and the price will also increase. Hence except option a other options are not correct. Therefore, option a is the correct answer.

2) The answer is option c.

If aggregate demand decrease then the aggregate demand (AD) curve shift to leftward. So, for a given aggregate supply curve if aggregate demand decrease then the AD curve will shift to leftward. As a result, the real GDP will decrease and the price will also decrease. Hence except option c other options are not correct. Therefore, option c is the correct answer.

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