Question

How do I draw an AD-AS curve when there is a contraction in demand side factors?

How do I draw an AD-AS curve when there is a contraction in demand side factors?

Homework Answers

Answer #1

Contraction in demand due to lower consumption in a Contractionary monetary policy leads to AD curve shift leftwards and reaches new equilibrium point E1 from E0 earlier where the Longrun aggregate supply curve intersects and this causes the prices and aggregate output to decline in short run. However in long run the economy self adjusts itself back to E0 or initial equilibrium point.

PLEASE UPVOTE INCASE YOU LIKED THE ANSWER WILL BE ENCOURAGING FOR US THANKYOU VERY MUCH ALL THE BEST IN FUTURE

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
how do i draw both a loanable fund and as/ad model
how do i draw both a loanable fund and as/ad model
Draw an AS-AD curve demonstrating an aggregate demand shock and the resulting effects of inflation and...
Draw an AS-AD curve demonstrating an aggregate demand shock and the resulting effects of inflation and output.
1. Draw the Demand curve & show change in price & the outside factors 2. Draw...
1. Draw the Demand curve & show change in price & the outside factors 2. Draw the supply curve & show change in price & the outside factors
Discuss the reasons why the aggregate demand (AD) curve slopes downward. What causes the AD curve...
Discuss the reasons why the aggregate demand (AD) curve slopes downward. What causes the AD curve and aggregate supply (AS) curve to shift, respectively? How would a change in AD and AS affect the economy, respectively? Why do Keynesian economists emphasize AD whereas classical economists emphasize AS?
Describe the various factors affecting demand and also draw the demand curve if it is perfectly...
Describe the various factors affecting demand and also draw the demand curve if it is perfectly inelastic and the demand for cardiac bypass surgery, given that the government pays the full cost for any patient.
Describe the various factors affecting demand and also draw the demand curve if it is perfectly...
Describe the various factors affecting demand and also draw the demand curve if it is perfectly inelastic and the demand for cardiac bypass surgery, given that the government pays the full cost for any patient. Please don't copy the answer from the web, this needs to pass the plagiarism check
how do you draw the demand curve q=250-10p calculate the price elasticity of demand at prices...
how do you draw the demand curve q=250-10p calculate the price elasticity of demand at prices of $5, $10, and $15 to show how it changes as you move along this linear demand curve
consider the macroeconomic AD-AS model with an aggregate demand curve and a short-run aggregate supply curve....
consider the macroeconomic AD-AS model with an aggregate demand curve and a short-run aggregate supply curve. assume that changes in national output also represent changes in real GDP. a. use the AD-AS model to explain and illustrates the differences between demand-side measures and supply-side measures and give an example of each. you also need to mention which markets are embedded within each curve. b. use the AD-AS model to analyse and illustrate the short run impact of an increase in...
When the price is ​$66 a​ unit, demand is perfectly elastic. Draw the demand curve for...
When the price is ​$66 a​ unit, demand is perfectly elastic. Draw the demand curve for this good. Label it D1.     When the quantity demanded is 99 million units a​ year, demand is perfectly inelastic. Draw the demand curve for this good. Label it D2.     When the price is ​$1212 a​ unit, the quantity demanded is 33 million units a​ year, and demand is unit elastic. Draw the demand curve for this good. Label it D3.
Explain and use an AS/AD diagram and a demand/supply diagram for the Canadian dollar to illustrate...
Explain and use an AS/AD diagram and a demand/supply diagram for the Canadian dollar to illustrate how the Bank of Canada can eliminate an inflationary gap with monetary policy. Note in the AS/AD diagram you do not need to draw the multiplied (AD +/- ∆E) aggregate demand curve. Be sure to address the impact of monetary policy on all components of AD except for G. Explain and use an AS/AD diagram and a demand/supply diagram for the Canadian dollar to...