ticular year? (See page 232.) 8. Assu me that the position of a nation\'s aggreg

Question

ticular year? (See page 232.) 8. Assu me that the position of a nation's aggregate demand curve has not changed, but the long-run equilibrium price level has declined. Other thin gs being equal, which of the following factors might account for this event? (Sce page 232.) a. An increase in labor productivity b. A decrease in the capital stock c. A decrease in the quantity of money in circulation d. The discovery of new mineral resources used to produce various goods e. A technological improvement 10-9. Suppose that there is rudd

Explanation / Answer

Aggregate demand curve is drawn reflecting the negative relationship between price level and real GDP. Now there has been a reduction in the long run equilibrium price level but aggregate demand curve has not shifted. We can therefore believe that there must be a change in the long run aggregate supply curve. Because the price is reduced, we expect that the long run aggregate supply must have shifted to the right. This can be done by an improvement in the technology which will improve the productivity of the nation as well as an increase in the labour productivity. When there is a discovery of new mineral resources the production ability of the nation is also increased.

Option A, option D and option E are correct.

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