Question

Which of the following events is most likely to decrease (i.e. leftward shift) an economy’s short-run aggregate supply (SRAS)?

		The price of crude oil declines.
		A new technology lowers production costs.
		No natural disaster in the year.
		Lockdown of economy by virus pandemic.

Which of the following events is most likely to decrease (i.e. leftward shift) an economy’s short-run aggregate supply (SRAS)?

		The price of crude oil declines.
		A new technology lowers production costs.
		No natural disaster in the year.
		Lockdown of economy by virus pandemic.

In the end of summer, go-back-to-school students will generally _____ the periodic unemployment rate because ______.  

		raise; more people get a job.
		lower; more people get a job.
		raise; fewer people search a job.
		lower; fewer people search a job.

The following table shows the real GDP and the CPI for an economy:

Year	2018	2019
CPI	100	105
Real GDP	$5.0 trillion	$4.8 trillion

      In the view of monetarists with the “Equation of Exchange”, the money supply growth rate in 2019 should be ____ to maintain the inflation

YEAR 2018 --> CPI = 100 REAL GDP = $5 trillion

YEAR 2019 --> CPI = 105 REAL GDP $4.8 trillion

		0.5%
		1.0%
		3.0%
		9.0%

Answer 1

Q1) the answer is (d) Lockdown of economy by virus pandemic as this reduces the inputs available to the firms to produce and the SRAS curve shifts to the left. All other options are incorrect as they increase the supply and shift SRAS to the right.

Q2) The answer is (d) lower; fewer people search a job.

Since students who were in the labor force in summer will go back to school by the end of the summer, it reduces the number of people searching for jobs and will reduce the periodic unemployment rate

Q3) According to equation of exchange

% change in money supply = % change in price + % change in real GDP

= (105 - 100 / 100)*100 + (4.8 - 5 / 5)*100

= 5 + (-4)

= 1

Thus, the answer is (b) 1%