ECONOMICS
AGGREGATE SUPPLY
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the short-run aggregate supply curve shifts to the right.
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the short-run aggregate supply curve shifts to the left.
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the long-run aggregate supply curve shifts to the right.
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the aggregate demand curve shifts to the left.
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the aggregate demand curve shifts to the right.
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Detailed explanation-1: -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.
Detailed explanation-2: -Higher prices for inputs that are widely used across the entire economy, such as labor or energy, can have a macroeconomic impact on aggregate supply. Increases in the price of such inputs represent a negative supply shock, shifting the SRAS curve to shift to the left.
Detailed explanation-3: -Conversely, a decline in the price of a key input like oil will shift the SRAS curve to the right, providing an incentive for more to be produced at every given price level for outputs. From 1985 to 1986, for example, the average price of crude oil fell by almost half, from $24 a barrel to $12 a barrel.