Question

in output WHAT SHIFTS THE SHORT-RUN AGGREGATE SUPPLY CURVE? SRAS, SRAS, BRAS, 1. Determine whether each change listed in the table below will cause an increase, decreased or no change in Aggregate Supply (AS). Always start with SEASO. 2. IN column 1, list which component of AS is affected: input prices or productivity 3. IN column 2, draw an up arrow if the change will cause an increase in AS, a down arrow if it will cause a decrease in AS< and write NC if it will not change AS 4. In column 3, write the number of the SRAS curve after the change

Answer 1

Answer 1:

1. As wage rate increases, input prices are effected. This leads to decrease in aggregate supply as quantity supplied of onions falls at each price level. Thus, SRAS₀ shifts to SRAS_1.

2. Oil is also used as an input in the production of onions. Thus, with increase in oil prices, input prices are impacted. This leads to decrease in aggregate supply as quantity supplied of onions falls at each price level. Thus, SRAS₀ shifts to SRAS1.

3. Increase in labor productivity will impact productivity determinant of aggregate supply. Thus, aggregate supply curve will increase with increase in labor productivity. This leads to rightward shift of the SRAS0 to SRAS 2.

4. Energy is also used as an input in the production process. Decrease in energy prices will increase aggregate supply at each price level and lead to rightward shift of the aggregate supply from SRAS0 to SRAS 2.