Long-Run Aggregate Supply, Recession, and Inflation- Macro Topic 3.4 and 3.5

Mr. Clifford introduces aggregate demand and supply, explaining how they meet at equilibrium, affecting GDP and price levels. He discusses demand and supply shocks, using the Great Depression as an example, and introduces stagflation. The video contrasts short-run and long-run economic adjustments, highlighting recessionary and inflationary gaps. It concludes with a discussion on self-correction and government intervention in the economy.

What happens to the price level and output when there is an increase in aggregate demand?

• Price level decreases, output decreases

• Price level increases, output increases

• Price level decreases, output increases

• Price level increases, output decreases

What is a demand shock?

• A decrease in government spending

• An increase in consumer savings

• A shift in aggregate demand

• A sudden increase in aggregate supply

What economic condition is characterized by high inflation and stagnant growth?

• Stagflation

• Deflation

• Boom

• Recession

In the long run, how does the economy self-correct a recessionary gap?

• By increasing wages and resource prices

• By decreasing wages and resource prices

• By increasing government spending

• By decreasing taxes

What happens to wages and resource prices in the long run during inflation?

• They remain constant

• They fluctuate randomly

• They decrease

• They increase