. Determine whether each of the following situations (a, b and c) would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve (Long run and Short run), neither, or both.

Question

• Which curve shifts, and in which direction? What happens to aggregate output and the price level in each case? Is there an expansionary, contractionary, or no gap between the potential output and the actual output? And, is the unemployment rate lower or higher than the natural rate of unemployment.
a. Consumer confidence declines.
b. The supply of resources increases i.) temporary increase, ii.) permanent increase
c. The wage rate increases

Answer 1

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