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April 28, 2024, 01:10:55 pm
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Author Topic: AD AND AS  (Read 808 times)  Share 

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manutd

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AD AND AS
« on: April 28, 2018, 02:32:03 pm »
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How do changes in AD and AS affect economic growth, employment and the general level of prices? ;) ;)
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oJL8A99A

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Re: AD AND AS
« Reply #1 on: May 01, 2018, 08:07:54 pm »
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Quote from: manutd on April 28, 2018, 02:32:03 pm
How do changes in AD and AS affect economic growth, employment and the general level of prices? ;) ;)

Increased AS
Economic growth: increases as supply is increasing, meaning more is being produced.
Employment: increases as demand for labour increases as businesses increase production (meaning if businesses are making more they'll need more people to do it.
General level of prices: basically refers to inflation. Inflation will decrease as a shift to the right of the AS curve will cause price to decrease and quantity to increase. Quantity essentially refers to GDP and price to inflation. Therefore, inflation will decrease

*For decreased AS it's just the opposite *
Increased AD
Economic growth: increases as a shift to the right of the AD curve causes quantity (GDP) to increase
Employment: increases as demand for labour due to increased production increase
General level of prices: increases as a shift to the right of the AD curve causes price (inflation) to increase

*opposite occurs for decreased AD*

Hope this helps :)
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