The following graph shows a decrease in aggregate supply (AS) in a hypothetical

Question

The following graph 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 100 to fall from $200 billion to $150 billion.

A) Fill in the table by indicating the changes in the determinants necessary to decrease aggregate supply.

Change Needed to Decrease AS Input prices (Increase/Decrease) Tax rates (Increase/Decrease)      Burdensome regulations (Increase/Decrease) 200 AS2 175 AS1 150 125 -100 -- C3 75 50 25 0 50 100 150 200 250 300 350 400 QUANTITY OF OUTPUT

Explanation / Answer

Change Needed to Decrease AS Input prices Increase Tax rates Increase     Burdensome regulations Increase

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