Question

Describe 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

Answer 1

Answer:

Short Run Aggregate Supply SRAS is the total goods and services available in an economy at different price levels with respect to fixed production resources.

Explanation:

A) When the price level increases, aggregate supply increases as well because demand is high and manufacturers will produce more.

B) When Input prices decrease, short run aggregate supply is not affected.

C) When firms and workers expect the price level to fall, aggregate supply decreases to cushion the effect of imminent loss due to fall in prices.

D) When the price level decreases, supply also decreases since it is an indication that the market is approaching saturation,

E) New policies increase the cost of meeting government regulations and does not necessarily influence SRAS.

F) The number of workers in the labor force does not affect SRAS.