Question

P15. Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both. Which curve shifts, and in which direction? What happens to aggregate output and the price level in each case? a. The price level changes – b. Consumer confidence declines – c. The supply of resources increases – d. The wage rate increases –

Answer 1

Answer:

Explanation:mm

a.When the price level changes

Both the demand and supply curve shifts.

The demand curve shifts upward and supplies curve shifts in a downward direction.

Aggregate output decreases.

Price level increases.

b.When consumer confidence declines

Both curves shift downwards.

Aggregate output decreases.

Price level decreases.

c.When the supply of resources increases

Only the supply curve shifts in an upward direction.

Aggregate output increases.

The price level decreases.

d.When the wage rate increases

Only the supply curve shifts in a downward direction.

Aggregate output decreases

The price level increases.