This Question: 2 pts 1 of 20 (0 complete) This Quiz: 40 pts possible Price level

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This Question: 2 pts 1 of 20 (0 complete) This Quiz: 40 pts possible Price level In the graph, the initial aggregate supply curve is AS and the initial aggregate demand curve is AD The events which could have changed short-run aggregate supply from ASo to AS, are AS A, a fal in the money wage rate or a fall in the money price of any other factor of production B. an increase in taxes or a decrease in government expenditures O C. a rise in the money wage rate or a rise in the money price of any other factor of production O D. a rise in the interest rate or a decrease in the quantity of money 0 E, a decrease in expected future profits or an increase in expected inflation Following the change in aggregate supply, the new macroeconomic equilibrium is at OA. pointA 110 105 B. pointB O C. point O D. point D If potential GDP is $1 trillion, the economy has ssony 09 :10 1 1 0.9 85 0.7 1.1 Real GDP (trillions of 2009 dollars) no output an inflationary Click to select your answer

Explanation / Answer

Ans:

1) Option C

a rise in the money wage rate or a rise in the money price of any other factor of production.

2) Point A

3) a recessionary gap

Aggregate supply decreases when the aggregate supply curve shifts to the AS0 to AS1 . This change is caused due to factors such as a rise in the money wage rate or a rise in the money price of any other factor of production.

. The equilibrium point after such change is point A , real GDP is $0.9 trillion and the price level is 105.  There is a recessionary gap since the economy is at a below full-employment equilibrium.

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