Question

165 9. Which of the following should not be considered to be a supply side policy? a. a decrease in the deficit b. a reduction of the tax on consumption c. a middle class tax cut d. none of the above 10. Whenever the aggregate supply curve shifts, the short rur aggregate supply curve also shifts. However, it is not the case that whenever the short run aggregate supply curve shifts, the long run aggregate supply curve also shifts. a. true b. false 11. Which of the following will lower the growth rate of the economy a. a positive demand side shock b. a negative demand side shock c. a positive supply side shock d. a negative supply side shock 12. The supply side of the economy is mainly responsible for economic cycles while the demand side of the economy is mainly responsible for economic growth a. true b. false 13. The long-run aggregate supply will increase for all the following reasons EXCEPT a. increased money wages. b. increased human capital. c. introduction of new technology. d. increased capital.

Answer 1

Ans:9 b. a reduction in tax on consumption

Reason: this will be termed as the demand side policy as it will change the aggregate demand due to change in tax.

Ans:10 True

Reason: the long run aggregate supply curve depicts the economic growth of the country and shows the full potential of the economy. It cannot shift with the shift in the short run supply curve.

Ans:11 d. a negative supply side shock

Reason: the negative supply side shock will hamper the long run growth of the economy.

Ans:12 False

Reason: the supply side is mainly responsible for the economic growth.

Ans:13 a. increase in money wages

Reason: increase in money wages will shift the short run supply curve to the left.