ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A decrease in wage rates
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A decrease in government spending
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An increase in taxation
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An increase in investment expenditure
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Detailed explanation-1: -A higher level of productivity shifts the SRAS curve to the right because with improved productivity, firms can produce a greater quantity of output at every price level.
Detailed explanation-2: -Lower production costs will increase the aggregate supply in the economy. The aggregate supply curve will shift to the right.
Detailed explanation-3: -The aggregate demand curve shifts to the right as the components of aggregate demand-consumption spending, investment spending, government spending, and spending on exports minus imports-rise. The AD curve will shift back to the left as these components fall.
Detailed explanation-4: -An increase in the price of natural resources or any other factor of production, all other things unchanged, raises the cost of production and leads to a reduction in short-run aggregate supply.