2Suppose that government imposes a costly new regulation on most firms in an eco

Question

2Suppose that government imposes a costly new regulation on most firms in an economy. On the AD & AS model, this will cause a) The AS curve to shift right b) The AS curve to shift left c) The AD curve to shift right d) The AD curve to shift left 3. Suppose that in a fake economy most workers riot and as a result most firms must pay higher wages. On the AD & AS a) The AS curve to shift right b) The AS curve to shift left c) The AD curve to shift right d) The AD curve to shift left 4. Suppose that an economy relies heavily on imported oil, but due to a war all imported oil supplies are cut off. On the AD & AS model, this will cause a) The AS curve to shift right b) The AS curve to shift left c) The AD curve to shift right d) The AD curve to shift left 5. Suppose that a country discovers huge new amounts ofnatural gas that it can extract to provide very cheap electricity to businesses in the country. On the AD & AS model, this will cause a) The AS curve to shift right b) The AS curve to shift left c) The AD curve to shift right d) The AD curve to shift left

Explanation / Answer

2.b. As curve to shift left. The tax will increase the cost of production and hence supply will decrease.

3. b. As curve to shift left. Higher wages will result in the increase the cost of production and hence supply will decrease.

4.b. As curve to shift left. Cut off in import will decrease oil supply and hence Aggregate supply curve will shift to left.

5. a. AS curve to shift to the right. This discovery will increase natural resources in the economy and hence aggregate supply will increase.

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