Question

-State whether each of the following events shifts either the aggregate demand or the short-run aggregate supply curve.

-Explain why the curve shifts.

-Describe what happens to the short-run equilibrium price level, aggregate output, and the national unemployment rate because of the event.

-Illustrate your answer with a graph.

-Analyze each event independently.

A. In the manufacturing sector, output per labor hour (productivity) increased approximately 6% in the fourth quarter of 2017.

B. Climate change increases agricultural production costs. Weeds, pests, and fungi thrive in warmer temperatures causing U.S. farmers to spend more on eradication.

C. The recently passed tax legislation lowers individual income tax rates.

D. The Federal Reserve, the central bank of the United States, continues to increase interest rates in 2018.

Answer 1

A) Aggregate supply curve shifts rightward increase in the productivity of the labors manufacturing contribute more supply of the outputs hence aggregates supply curve shift rightward.

2) Aggregate supply curve to shift to leftward due to increasing the cost of production the total output of the agriculture sectors falls hence aggregate supply curve shift leftwards.

3) Aggregated demand rises and aggregate demand curve shift upwards indicates that increasing the purchasing power of the peoples by reducing the taxation.

4) Aggregated demand falls due to rising in interest rate leads to falling in the investment and output the bank borrowings becomes expensive.