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Which of the following will most likely increase long-run aggregate supply? a. an increase in the...

Which of the following will most likely increase long-run aggregate supply? a. an increase in the rate of investment b. an increase in resource prices c. an increase in the minimum wage d. an increase in the expected inflation rate

Suppose the economy is initially in long-run equilibrium and then it experiences a supply shock in the form of sharply higher energy prices. Which of the following is true? a. The short-run aggregate supply curve shifts leftward and the long-run supply curve shifts rightward. b. The short-run aggregate supply curve shifts rightward and there is a movement along the aggregate demand curve. c. The short-run aggregate supply curve does not shift and the long-run aggregate supply curve shifts rightward. d. The short-run aggregate supply curve shifts rightward but the long-run aggregate supply curve does not shift. e. The short-run aggregate supply curve shifts leftward and there is a movement along the aggregate demand curve.

an increase in the expected inflation rate An abnormally large grain crop due to highly favorable weather conditions in the Midwest is an example of a. a technological improvement that will increase long-run aggregate supply. b. a supply shock that will increase short-run aggregate supply. c. an unexpected development that will reduce the natural rate of unemployment. d. an unexpected development that will lead to excess supply and widespread unemployment

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Answer #1

1. Option A. an increase in the rate of investment

Explanation: Long-run aggregate supply depends on the production capacity of an economy. When there is an increase in the rate of investment, the production capacity also increases and so does the long-run aggregate supply.

2. Option E. The short-run aggregate supply curve shifts leftward and there is a movement along the aggregate demand curve.

Explanation: The supply shock will result in a leftward shift in the short-run aggregate supply curve. As a result, the price will go up and there will be a movement along the aggregate demand curve.

3. Option B. a supply shock that will increase short-run aggregate supply.

Explanation: A sudden and unexpected increase in supply is an example of a supply shock. It increases the short-run aggregate supply.

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