Question

Favorable weather    a.    would cause the AS curve to shift leftward, thereby increasing both...

Favorable weather
   a.   

would cause the AS curve to shift leftward, thereby increasing both output and the price level
   b.   

would increase firms’ unit costs
   c.   

is an example of a negative supply shock
   d.   

is an example of a positive demand shock
   e.   

would lead to an increase in output and a decrease in the price level

A negative supply shock
   a.   

decreases real GDP and increases the price level in the short run.
   b.   

shifts the AS curve downward.
   c.   

decreases both real GDP and the price level in the short run.
   d.   

increases real GDP and decreases the price level in the short run.
   e.   

results in a movement down and to the left along the AS curve.

A positive demand shock will
   a.   

shift the AD curve to the left.
   b.   

decrease real GDP and increase the price level in the short run.
   c.   

decrease real GDP and the price level in the short run.
   d.   

increase real GDP and the price level in the short run.
   e.   

increase real GDP and decrease the price level in the short run.

Business   Economics   
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Answer #1

Ans: e) would lead to an increase in output and a decrease in the price level.

Explanation:

Favorable weather leads more production of raw materials. So that production level increases. As a result , the supply of output increases and the price of the output decreases.

Ans: a) decreases real GDP and increases the price level in the short run.

Explanation:

A negative supply shock leads less supply of goods in the market . As a result price level increases.

Ans:d) increase real GDP and the price level in the short run.

Explanation:

A positive demand shock will increase the demand for goods in the market. It creates inflationary gap in the economy . As a result there will be an increase real GDP and the price level in the short run.

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