If not then what mechanism allows the economy to move toward equilibrium?.
s an outside shoc Show more The intersection of AS and AD is an equilibrium. This means that unless theres an outside shock to the system the price level and RGDP will remain at the equilibrium levels. Further if the price level is higher or lower than equilibrium there are forces that will work to bring it back toward equilibrium. A. If the price level is above the equilibrium price level how does the aggregate quantity of goods and services demanded compare to the aggregate quantity of goods and services supplied at the price level? Is this a condition of equilibrium? If not then what mechanism allows the economy to move toward equilibrium? B. If the price level is below the equilibrium price level how does the aggregate quantity of goods and services demanded compare to the aggregate quantity of goods and services supplied at the price level? Is this a condition of equilibrium? If not then what mechanism allows the economy to move toward equilibrium? Governments sometimes try to change government spending or taxes to affect real output and the price level. A. If the government wants to use either government spending or taxes paid by households to increase aggregate demand how should G change and how should T change? B. If the government wants to use either government spending or taxes paid by households to decrease aggregate demand how should G change and how should T change? Show less
If not then what mechanism allows the economy to move toward equilibrium?
