Question

Identify how each of the scenarios affects short‑run aggregate supply.

Answer 1

Answer:

a. decrease

b. increase

c. increase

d. no change

Explanation:

A higher minimum wage increases labor costs for the firm and aggregate supply decreases.

An increase in productivity caused by the Internet increases the aggregate supply curve.

A decrease in taxes paid by firms reduces operating costs and causes the aggregate supply curve to increase.

If businesses anticipate a recession, the aggregate supply curve decreases as firms cut production levels.

A decrease in the personal income tax rate paid by households has no impact on aggregate supply; this would impact aggregate demand.