1. Determine whether each of the following would cause a shift of the sgaregate
ID: 2440488 • Letter: 1
Question
1. Determine whether each of the following would cause a shift of the sgaregate demand (AD) curve, a shilt of the sogregate supply (AS) curve, neither, or both. Which curve wl shift, and in which direction? What will happen to aggregate output and the price level in each case? a. The price level changes. Which drecion does i shi What wll happen to the price leve b. Consumer confidence declines L Which curve will shi v Whal wil happen to the price leve? e. The supply of resources increases. L Which curve will shit What happens to aggregateoutpur? v What happens to the price levelr d. The wage rate increases What will happen to aggregate oulpu? happen to the price levelExplanation / Answer
a ) 1) As a result of changes in price level neither AD or AS will shift.
2) AD or AS will not shift in any direction.
3)output will come down to the original level.
4 ) Price will come down to the original level.
b) 1) AD will shift
2) AD will shift downward backward direction.
3)Aggreagate output will fall.
4) Price will fall
c) 1)AS will shift
2)It will shift in Forward direction
3)Aggregate output will increase
4)Price level will fall
d) 1)Shift in both AS and AD
2)AS will shift downward forward direction AD will shift upward and forward direction
3) Aggregate output will increase
4) Pricce level will be same, up or down the original price depending on the level of shift of both the cuves
.
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