Question

2. Describe the effect that a shift along the curve will have on output, unemployment, and the price level.

Answer 1

Answer - The shift can be described in two forms namely the rightward shift and the leftward shift. The rightward shift in the AD curve will lead to the increase in the level of output in economy , increase in the price levels and the decrease in the level of unemployment. This is a good condition for the economy.

In the case of the leftward shift , there is decrease in the output level in the economy , the AD decreases , so the price level will also decrease. Due to decrease in level of output , the unemployment rate increases.