a courses.aplia.com Aplia Student Question 6 Why The Aggregate Supply Curve Slop

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a courses.aplia.com Aplia Student Question 6 Why The Aggregate Supply Curve Slopes Upward Graded AssignmentRead nt Due Sunday 07 22.18 at 11:45 PM Attempts: O Average: 0/1 7. Determinants of short-run aggregate supply The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from ASi to AS:, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion. 200 175 AS 150 125 100tt 75 50 0 50 100 150 200 250 300 350 400 QUANTITY OF OUTPUT

Explanation / Answer

Decrease in input prices leads to increase in AS. This is because decrease in input prices leads to reduction in cost of production which raise the profit margin of firms inducing them to increase production which leads to increase in AS.

Decrease in tax rates leads to increase in AS. This is because decrease in tax rates leads to reduction in cost of production which raise the profit margin of firms inducing them to increase production which leads to increase in AS.

Burdensome regulations reduces the compliance cost which in turn induces firm to expand and increase production leads to increase in AS.

Following is the complete table -

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

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