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ECON 201-Chapter 13 Problem Set

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what is the meaning of a leftward shift in the long-run aggregate supply (lras) curve?

Eastern Michigan University

Principles Of Macroeconomics (ECON 201)

ECON 201 – Elias
Chapter 13 Problem Set – The Aggregate Demand-Aggregate Supply Model
1. Describe whether the following changes cause the short-run aggregate supply curve to
increase (shift right), decrease (shift left), or neither.
(a) The price level increases.
Neither. If the price level increases, the quantity of short-run aggre-gate supply (SRAS) will
increase, but SRAS itself will not shift.
(b) Input prices decrease.
SRAS increases. Decreasing input prices will make it cheaper to produce goods, which will
cause an increase in SRAS
(c) Firms and workers expect the price level to fall.
SRAS increases.
(d) The price level decreases.
Neither. If the price level decreases, the quantity of aggregate supply
will decrease, but SRAS itself will not shift.
(e) New policies cause an increase in the cost of meeting government regulations.
SRAS decreases. If a new policy increases firms’ cost of meeting government regulations, this
causes a leftward shift of long-run aggregate supply (LRAS). Remember that whenever LRAS
shifts, SRAS shifts with it. Therefore, SRAS will also shift left.
(f) The number of workers in the labor force increases.
SRAS increases. If the number of workers in the labor force increases, then resources, too,
increase. This will increase LRAS, which means SRAS will increase correspondingly

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ECON 201-Chapter 13 Problem Set

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