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Which of the following will most likely cause a decrease in short-run aggregate supply (leftward shift) in the goods and services market?

 35. Which of the following will most likely cause a decrease in short-run aggregate supply (leftward shift) in the goods and services market?

 a. An increase in the productivity of labor

 b. A reduction in the price of crude oil, a major imported commodity

 c. An increase in resource prices

 d. Favorable weather conditions in agricultural areas.


 36. The vertical long-run aggregate supply curve reflects the fact that in the long run, an increase in the price level. a. Will not alter the economy's maximum sustainable rate of output.

 b. Will increase the economy's maximum sustainable rate of output.

 c. Will reduce the quantity of goods and services

 purchasers will demand.

 d. Will improve the overall efficiency of resource use.


 37. An abnormally large grain crop due to highly favorable weather conditions in the Midwest is an example of a(n) a. Technological improvement that will increase long-run aggregate supply.

 b. Supply shock that will increase short-run aggregate supply.

 c. Unexpected development that will reduce the natural rate of unemployment.

 d. Unexpected development that will lead to excess supply and widespread unemployment.


 38. Within the AD/AS model, decreased consumer and investor

 optimism concerning the future direction of the economy will lead to a(n)

 a. Inerease in aggregate demand (AD shifts to the right) b. Decrease in aggregate demand (AD shifts to the left) c. Increase in long-run aggregate supply (LRAS shifts to the right).

 d. Reduction in the natural rate of unemployment.


 39. An increase in the general level of prices in the goods and services market that is accompanied by a short-run reduction in real GDP is most likely caused by

 a. An unanticipated decrease in aggregate demand.

 b. An unanticipated increase in aggregate demand.

 c. A favorable supply shock that shifts SRAS to the right. d. An unfavorable supply shock that shifts SRAS to the left.



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Answer #1

35) option C is correct. In goods market the short run aggregate supply curve is likely to shift to the left when there is an increase in the cost of production. This can happen when there is increase in the wage rate or an increase in the price of some other resource which causes production to decline.

36) option A is correct. long run aggregate supply curve shows the maximum level of output that the economy can produce with all its resources. It is not related to price and so change in price will not affect this level

37) option B is correct

38) option B is correct

39) option d is correct.

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