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Questions › JNU › JNU SIS 2012 › Q20
4 marks, −1Macroeconomics › AD-AS model › Keynesian and short-run aggregate supplyEasyabout 1 min

JNU SIS 2012 Question 20: AD-AS model

Suppose equilibrium output is Y0Y_0Y0​, which is below the full employment level, and the price level is P0P_0P0​ for an aggregate demand and a Keynesian aggregate supply curve. An increase in government spending will result in

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Suppose equilibrium output is Y₀, which is below the full employment level, and the price level is P₀ for an aggregate demand and a Keynesian aggregate supply curve. An increase in government spending will result in (A) an increase in the price level and no change in the equilibrium level of output (B) an increase in the equilibrium level of output and the price level (C) an increase in the equilibrium level of output and a decrease in the price level (D) an increase in the equilibrium level of output and no change in the price level

Also written as: Suppose equilibrium output is Y_0, which is below the full employment level, and the price level is P_0 for an aggregate demand and a Keynesian aggregate supply curve. An increase in government spending will result in

AD-AS model has come up 59 times in 7 exams since 2004.

What this question tests

This question is on Keynesian and short-run aggregate supply, part of AD-AS model in Macroeconomics.

Why output responds to demand in the short run: sticky wages and prices, wage floors and upward-sloping supply.

TestStop has 24 past-paper questions on this subtopic; the nearest in year are below.

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