3. declines / improves 7. Determinants of aggregate supply Aa Aa The graph below

Question

3. declines / improves

7. Determinants of aggregate supply Aa Aa The graph below shows a decrease in aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, aggregate supply shifts to the left from AS1 to AS2, causing the quantity of output supplied at a price level of 125 to fall from $250 billion to $150 billion. PRICE LEVEL 200 175 AS2 150 AS1 125-- 100 75 50 25 50 100 150 200 250 300 350 400 QUANTITY OF OUTPUT (Billions of dollars) The table below lists several determinants of aggregate supply. Fill in the table by indicating the changes in the determinants necessary to decrease aggregate supply. Determinant Input prices Tax rates Technology Change Needed to Decrease AS

Explanation / Answer

Aggregate supply curve is drawn for input prices tax rates and the level of Technology. If the aggregate supply curve shifts to the left it employees that the input cost must have increased. Higher cost of production would have reduced total output produced.

There must be an increase in the tax rate which would have discussed firms to maintain the same level of output. When the tax rate is increased firms will respond by not investing a retained profits so that production will reduced.

The level of Technology should decline because then it would increase the cost of production and so is agreegate supply will shift to the left

Correct choices are, increase, increase and declines.

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