Question

Using macroeconomic,

What are some transistors factors that push the economic aggregated supply curve outward at an unusually rapid pace between 1996-1998. Why?

Answer 1

Unusual rapid increase in aggregate supply and real GDP between 1996-1998 is known as the period of economy on a roller coaster. The factors that influenced the increase in AS are-

1) government's deficit reduction package by cutting spending and increasing taxes. During 1980s the economy went into recession due to hike in oil prices and during that period government faced a huge budget deficit, which they needed to recover.

2) Large fiscal surplus - Government faced large fiscal surplus after cutting down spending and increasing tax rate.

3) Economy boom- At that time economy boomed due to globalization and computerization.

4) Output increase, lower inflation, productivity increased - Due to all of these the AS curve was pushed outward at an unusually rapid pace between 1996-1998.