1. The long-run aggregate supply curve (LRAS) is Y = Yf, which depends on the am
ID: 1229110 • Letter: 1
Question
1. The long-run aggregate supply curve (LRAS) is Y = Yf, which depends on the amounts of resources and the level of technology innovation. If a country has more resources and better technology, which of the following is true?A. The LRAS curve will shift to the right.
B. The SRAS will shift to the right.
C. The SRAS will shift to the left.
D. Only A and B.
E. Only A and C.
2. Suppose the wage rates of workers are based on the expected price level. If there is an unexpected increase in AD, it will cause the actual price level to increase. Then workers should raise their expected price level and negotiate a higher wage rate. Then which of the following is most likely to be true when the expected price increases?
A. The SRAS curve will shift rightward.
B. The SRAS curve will shift leftward.
C. The LRAS curve will shift leftward.
D. Only A and C.
E. Only B and C.
3. Suppose the economy is in the long-run equilibrium, i.e., Y = Yf, and there is an unexpected decrease in AD. Assume that Yf is fixed, then which of the following is most likely to be true?
A. The SRAS curve will shift to the right toward the new long-run equilibrium.
B. The SRAS curve will shift to the left toward the new long-run equilibrium.
C. In the new long-run equilibrium, price level will be higher.
D. Only A and C.
E. Only B and C.
Explanation / Answer
D. Only A and C.
Option A and B are right
So, option D is the right answer
For your understanding, I also included a explanation,
The short-run and long-run aggregate supply curves are shifted due to changes by any (ceteris paribus) factor other than the price level. Three broad determinant categories include:
Resource Quantity:This determinant is the quantity of the resources--labor, capital, land, and entrepreneurship--that the economy has available for production. If the economy has more resources, then aggregate supply increases and the short-run aggregate supply curve shifts rightward. With fewer resources, aggregate supply decreases and the short-run aggregate supply curve shifts leftward. Specific determinants in this category include population growth, labor force participation, capital investment, and exploration.
Resource Quality: This determinant is the quality of resources, especially technology and education. If the quality of labor, capital, land, and entrepreneurship change, then aggregate supply changes and the short-run aggregate supply curve shifts. An improved quality increases aggregate supply, triggering a rightward shift of the short-run aggregate supply curve, and a decline in quality decreases aggregate supply, generating a leftward shift of the short-run aggregate supply curve.
Resource Price: This determinant is the price of any of resource input used in production, especially wages and energy prices. Resource prices affect the cost of producing output and thus the price level charged for an existing quantity of real production. This determinant ONLY affects the short-run aggregate supply. Because the long-run aggregate supply is independent of the price level it is also unaffected by changes in resource prices and production cost
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