ECONOMICS
AGGREGATE DEMAND
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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above; fall
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below; fall
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above; rise
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below; rise
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Detailed explanation-1: -To correctly understand the aggregate supply curve, time is an essential factor. In the short run, rising prices (ceteris paribus) or higher demand causes an increase in aggregate supply.
Detailed explanation-2: -The short-run aggregate supply curve is upward sloping because the quantity supplied increases when the price rises. In the short-run, firms have one fixed factor of production (usually capital ). When the curve shifts outward the output and real GDP increase at a given price.
Detailed explanation-3: -Answer and Explanation: The income of consumers is held constant when a demand curve is constructed. Changes in income cause the demand curve to move from its position and, therefore, income needs to be assumed to be constant.
Detailed explanation-4: -Increases in the price of such inputs cause the SRAS curve to shift to the left, which means that at each given price level for outputs, a higher price for inputs will discourage production because it will reduce the possibilities for earning profits.