Question 1

What are positive and negative shocks?

Accepted Answer

Sudden increases/decreases in demand or supply

(negative supply shock = sudden decrease in supply)

Question 2

How do positive/negative shocks affect AD?

Accepted Answer

They cause output, employment, and the price level to rise/fall in the short run

Question 3

How do positive/negative shocks affect SRAS?

Accepted Answer

Positive: output and employment rise, price level falls

Negative: output and employment fall, price level rises

Question 4

What are the two main types of inflation?

Accepted Answer

Cost-push: changes in AS (higher costs push up prices)

Demand-pull: changes in AD (higher demand pulls up prices)

3.6 Short Run Changes in the AD-AS Model, AP Macroeconomics Flashcards