3.3 Macroeconomic Equilibrium

• What is the definition of macroeconomic equilibrium?

  AD and AS are balanced
• What factors influence Aggregate Demand (AD)?

  Consumption, Investment, Government Spending, Net Exports
• What happens to the price level and output if AD increases at equilibrium?

  Price level increases, output increases
• What three factors influence investment spending in AD?

  Interest rates, expected returns, business confidence
• What factors influence the total production capacity in AS?

  Availability of resources, labor force, infrastructure
• What happens to equilibrium price and output if AD increases?

  Price increases, output increases
• The equilibrium price and output are determined where Aggregate Demand (AD) equals Aggregate Supply (AS).


  True
• At macroeconomic equilibrium, changes in AD or AS will lead to adjustments in the price level and output.


  True
• Aggregate Supply (AS) is influenced by factors such as input prices, technology, and government regulations
• What happens to the equilibrium price and output if Aggregate Demand (AD) increases?

  Both increase
• If consumer confidence rises, the Aggregate Demand (AD) curve shifts to the right.

  True
• What is the equilibrium condition in the short run?

  AD equals AS
• What happens to the economy in the long run, regardless of short-term shifts in AD?

  Moves toward full employment
• Net Exports (NX) is a component of Aggregate Demand.


  True
• Increased Aggregate Demand (AD) increases both equilibrium price and output.


  True
• Increased Aggregate Supply (AS) leads to a decrease in equilibrium price and an increase in equilibrium output.


  True
• In the long run, AD equals Long-Run AS at the natural rate of unemployment
• Match the component of AD or AS with its definition:

  Aggregate Demand ↔️ Total planned expenditure on domestic goods and services

  Aggregate Supply ↔️ Total quantity of goods and services producers are willing to sell
• At macroeconomic equilibrium, the economy achieves a stable price level and full employment
• What three factors influence consumption spending in AD?

  Consumer confidence, disposable income, interest rates
• Order the key components of Aggregate Supply (AS) based on their influence on production capacity:

  1️⃣ Total Production Capacity

  2️⃣ Input Prices

  3️⃣ Technology

  4️⃣ Government Regulations
• How is equilibrium price and output determined in macroeconomics?

  AD equals AS
• What happens to the equilibrium price and output if consumer demand for electric vehicles increases?

  Both increase
• What are the factors that influence Aggregate Demand (AD)?

  Consumption, Investment, Government Spending, Net Exports
• Match the component of AD with its definition:

  Consumption (C) ↔️ Spending by households on goods and services

  Investment (I) ↔️ Expenditures by firms on capital goods

  Government Spending (G) ↔️ Expenditures by government on public services

  Net Exports (NX) ↔️ Difference between exports and imports
• Steps to determine the equilibrium price and output:

  1️⃣ Find where AD equals AS

  2️⃣ Identify the corresponding price and output

  3️⃣ Analyze the effects of changes in AD or AS
• An increase in input costs for producers will shift the AS curve to the left
• In the long run, the economy naturally moves toward full employment output regardless of short-term shifts in AD.

  True
• Government intervention can affect the short-run equilibrium through fiscal and monetary policies.


  True
• What is the definition of Aggregate Demand (AD)?

  Total planned expenditure
• What are the influencing factors on Aggregate Supply (AS)?

  Input prices and technology
• What is the impact of increased Aggregate Demand (AD) on the economy?

  Increases price and output
• What is the condition of unemployment in the short run if AD does not equal full employment AS?

  Exceeds natural rate
• Macroeconomic equilibrium results in a stable price level and full employment of resources
• At macroeconomic equilibrium, AD equals AS.


  True
• Match the component of AD with its definition and influencing factors:

  Consumption (C) ↔️ Spending by households on goods and services; Consumer confidence, disposable income, interest rates

  Investment (I) ↔️ Expenditures by firms on capital goods; Interest rates, expected returns, business confidence

  Government Spending (G) ↔️ Expenditures by government on infrastructure; Fiscal policy, economic priorities

  Net Exports (NX) ↔️ Difference between exports and imports; Exchange rates, trade policies, global demand
• Macroeconomic equilibrium occurs when AD equals AS.

  True
• What determines input prices in AS?

  Wages, raw material costs, energy prices
• What happens to equilibrium price and output if AS increases?

  Price decreases, output increases
• Macroeconomic equilibrium occurs when Aggregate Demand (AD) and Aggregate Supply (AS) are in balance