ECONOMICS
AGGREGATE DEMAND
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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supply shifts to the right
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supply shifts to the left
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demand shifts to the right
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demand shifts to the left
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Detailed explanation-1: -The aggregate supply curve shifts to the right as productivity increases or the price of key inputs falls, making a combination of lower inflation, higher output, and lower unemployment possible.
Detailed explanation-2: -In the long run, as prices and nominal wages decrease, the short-run aggregate supply curve moves back to SRAS1 and real GDP returns to potential. As a result, the price level rises to P2 and real GDP falls to Y2.
Detailed explanation-3: -A shift in the SRAS curve to the right will result in a greater real GDP and downward pressure on the price level, if aggregate demand remains unchanged. However, productivity grows slowly, at best only a few percentage points per year.
Detailed explanation-4: -A rise in the money wage rate makes the aggregate supply curve shift inward, meaning that the quantity supplied at any price level declines. A fall in the money wage rate makes the aggregate supply curve shift outward, meaning that the quantity supplied at any price level increases.