Determine whether each of the following would cause a shift in the aggregate demand curve, the aggregate supply curve, neither, or both. Which curve shifts, and in which direction? What happens to aggregate output and the price level in each case?
a. The price level changes
b. Consumer confidence declines
c. The supply of resources increases
d. The wage rate increases
Take a shot. Hint I think each case has a different answer (i.e, there one supply shift, one demand shift, one neither, one both). Repost if you are still having questions
Is this correct?
Determine whether each of the following would cause a shift in the aggregate demand curve, the aggregate supply curve, neither, or both. Which curve shifts, and in which direction? What happens to aggregate output and the price level in each case?
a. The price level changes (they both shift)
b. Consumer confidence declines (neither)
c. The supply of resources increases - aggregate supply curve shifts to the right
d. The wage rate increases - aggregate demand curve shifts to the right
zero for 4. But good try.
a) Price level changes are movements along the curves - they do not shift the curves. (Price may have changed because of a shift, but that is another issue).
b) with declining consumer confidence, people are "leery" about the future, they buy less especially big-ticket items. Aggregate demand shifts inward (left).
c) resources are inputs to production. When input prices go up, suppliers supply less at any given price. Aggregate supply shifts left (inward).
d) wage increase is an input price. So aggregate supply shifts left. However, higher wages means higher income which leads to an increase in demand for more good+services. Aggregate demand shifts out.
1 answer
1 answer