Question

7. SRAS, LRAS, AD curves are used to analyze macroeconomic changes. Which of these three curves or lines will shift and in which direction (right or left) under the following conditions? a. Oil is used as input in the production of many goods. Say, oil prices increase: b. A tax credit for small businesses inspires firms to buy new company cars: F. A decrease in the prices of raw materials that are used in the production process: d. An increase in import and decrease in export:........ e. A decrease in business taxes........ f. Considering that AD=C+I+G+NX. If income rises in foreign trading partners to the U.S. g. An increase in personal income taxes... h. People buy more as a result of increased consumer confidence:

only need answer numer E to H

Answer 1

a) A decrease in the taxes will shift the AD curve to the right and cause a movement along the supply curve, it will leave the LRAS will remain as it is.

b) An increase in the foreign income will shift the aggregate demand curve to the right and again cause the movement along the supply curve and leave the LRAS untouched.

c) Increase in the personal income tax will shift the aggregate demand curve to the left and cause a movement along the supply curve and leave the LRAS untouched.

d) This will shift the aggregate demand curve to the right and cause a movement along the SRAS leaving the LRAS as it is.