ECONOMICS
AGGREGATE SUPPLY
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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AD will shift right and an inflationary gap will result
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AD will shift left and a recessionary gap will result
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AS will shift right and an inflationary gap will result
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AS will shift left and a recessionary gap will result
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No change will result
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Detailed explanation-1: -If an economy is said to be in long-run equilibrium, then Real GDP is at its potential output, the actual unemployment rate will equal the natural rate of unemployment (about 6%), and the actual price level will equal the anticipated price level.
Detailed explanation-2: -Answer and Explanation: If an economy is in its long-run equilibrium, the prices will go up if aggregate demand increases.
Detailed explanation-3: -High production can strain resources and labor is working overtime. This will cause workers to ask for an increase in wages and cause supply to go down. This will then cause a decrease in aggregate supply (SRAS1 to SRAS) bringing the economy back to long-run equilibrium.
Detailed explanation-4: -The aggregate demand curve tends to shift to the left when total consumer spending declines. 2 Consumers might spend less because the cost of living is rising or because government taxes have increased. Consumers may decide to spend less and save more if they expect prices to rise in the future.