Understanding Aggregate Demand and Short-Run Aggregate Supply Shifts

The video tutorial explores the dynamics of aggregate demand and supply shifts, focusing on their impact on price levels, real output, and output gaps. It discusses economic situations like stagflation and cyclical unemployment, emphasizing the importance of understanding short and long-term equilibrium. The tutorial highlights how shifts in aggregate demand and supply affect economic growth and the role of output gaps in adjusting production costs. It concludes with insights into achieving sustainable economic growth through shifts in long-run aggregate supply.

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

• Price level rises, real output rises

• Price level falls, real output falls

• Price level rises, real output falls

• Price level falls, real output rises

How does an outward shift in aggregate demand affect the aggregate supply curve?

• It moves up the aggregate supply curve

• It shifts the aggregate supply curve to the left

• It moves down the aggregate supply curve

• It remains unchanged

What is the result of an inward shift in short-run aggregate supply?

• Falling output and falling inflation

• Rising output and rising inflation

• Falling output and rising inflation

• Rising output and falling inflation

What is demand-deficient unemployment?

• Unemployment due to seasonal changes

• Unemployment due to technological advancements

• Unemployment due to a lack of aggregate demand

• Unemployment due to government policies

What economic condition is characterized by rising inflation and unemployment?

• Stagflation

• Boom

• Deflation

• Recession

What happens to production costs when there is a negative output gap?

• Production costs become unpredictable

• Production costs remain the same

• Production costs rise

• Production costs fall

What is the effect of a positive output gap on resource prices?

• Resource prices fluctuate

• Resource prices fall

• Resource prices rise

• Resource prices remain constant

What is necessary for long-term economic growth according to the video?

• Long-term aggregate supply shifts

• Stable price levels

• Short-term aggregate demand shifts

• Constant real output

What is the result of an outward shift in aggregate demand without an increase in productive capacity?

• Stability

• Economic growth

• Inflation

• Deflation

What is the role of output gaps in economic adjustments?

• They cause permanent changes in the economy

• They lead to temporary shifts in production costs

• They only affect inflation rates

• They have no effect on the economy