Question

1. Describe and briefly explain whether the following changes cause the short-run aggregate supply to increase,...

1. Describe and briefly explain whether the following changes cause the short-run aggregate supply to increase, decrease or neither:

a. The price level increases

b. Input prices decrease

c. Firms and workers expect the price level to fall.

d. The price level decreases

e. New policies increase the cost of meeting government regulations.

f. The number of workers in the labor force increases.

Homework Answers

Answer #1

a) Increase in the price level will increase the quantity of goods supplied. leaving the supply curve unchanged, answer is "neither"

b) Input price decrease will "increase" the supply.

c) It will 'increase" the supply in the market and that will decrease the price level.  

d) It will not change the supply curve only causing a shift along the demand curve.

e) it will decrease the supply of goods in the market.

f) it will increase the suply in the market.

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