ECONOMICS
AGGREGATE DEMAND
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
What would be the effect of a decrease in regulations on businesses?
|
|
Increase AD
|
|
|
Decrease AD
|
|
|
Increase SRAS
|
|
|
Decrease SRAS
|
Explanation:
Detailed explanation-1: -These increased labor costs would cause business expenses to increase; as a result, firms would have lower output as they have less money to spend on production. Firms lowering output equals a decrease in SRAS.
Detailed explanation-2: -The SRAS curve slopes up for two reasons: sticky input prices (like wages) and sticky output prices (also called “menu costs”).
Detailed explanation-3: -A shift in the SRAS curve to the right results in a greater real GDP and downward pressure on the price level if aggregate demand remains unchanged.
There is 1 question to complete.