Question

1. Which media headline describes a leftward shift of the LAS curve?

A) "Decreased consumer spending may lead to recession."

B) "Increased consumer spending is expected to lead to inflation, with no change in real GDP."

C) "Higher wage settlements may lead to inflation."

D) "Faster growth may be due to more women entering the labour force."

E) "Recent tornadoes destroyed factories in Edmonton and Calgary."

2. A positive supply shock from falling input prices shifts

A) both the SAS and AD curves rightward.

B) both the SAS and LAS curves leftward.

C) the SAS curve rightward but leaves the LAS curve unchanged.

D) the LAS curve rightward but leaves the SAS curve unchanged.

E) both the SAS and LAS curves rightward.

3 Aggregate quantity demanded increases if

A) the price level rises.

B) expectations become more optimistic.

C) government taxes decrease.

D) the price level falls.

E) interest rates fall.

Answer 1

Question 1 - Which media headline describes a leftward shift of the LAS curve?

Answer - Option E "Recent tornadoes destroyed factories in Edmonton and Calgary."

Because LAS (Long Run Aggregate Supply) mens aggregate supply on Long period of time. And in long Run, aggregate supply is not affected by Price. It is affected by all factors of production like labour, capital stock, land, and the labour productivity. And when there is decrease in supply or production, the LAS curve shift to leftward.

If recent tornadoes destroyed factories in Edmonton and Calgary, it will directly affect the long run productivity. so the long run aggregate supply will also affect. so due to decrease in supply or production the LAS will shift to leftward.

Option A , B , C are wrong because these headlines shows the affect on price and in long run the price is not affect the LAS curve.

Option D is wrong because it shows faster growth. and when there is growth in supply, the LAS curve will shift rightward.