1. Determine whether each of the following would cause a shift of the aggregate

Question

1. Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of 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

i. Which curve shifts?


ii. Which direction does it shift?


iii. What happens to aggregate output?


iv. What happens to the price level?


b. Consumer confidence declines

i. Which curve shifts?


ii. Which direction does it shift?


iii. What happens to aggregate output?


iv. What happens to the price level?


c. The supply of resources increases

i. Which curve shifts?


ii. Which direction does it shift?


iii. What happens to aggregate output?


iv. What happens to the price level?


d. The wage rate increases

i. Which curve shifts?


ii. Which direction does it shift?


iii. What happens to aggregate output?


iv. What happens to the price level?

Explanation / Answer

A will cause the changes on the same demand and supply curve. B. will cause the demand curve to shift to the left.Both price and quantity will decrease C. will cause the supply curve to shift to the right.The price will decrease while the quantity will increase. D will cause the changes on the same demand and supply curve. .

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