In: Economics
For the following questions identy Which curve would be affected? is there a Movement Or Shift and is it left or right? PLEASE EXPLAIN WHY THE ANSWERS ARE CORRECT, I have the correct answers listed just need to know why
1. Hourly wages & salaries rose by 1.9% and the non-wage component by 1.4% in the year up to the second quarter of 2012, ? In 2012, the economy’s _________.? Answer: SRAS decreases
2. …a weak reading of German investor sentiment - on concerns about a slowing in U.S. economic momentum and uncertainty around the emerging markets outlook….” ? ______ in Germany _____.? Answer: AD, decreases
3. Thanks to a surge in demand from China, there is an increase in car manufacturing in last quarter in U.S.”? _________ in U.S. _____.
Answer: AD, increases.
4. In U.K., an underlying measure of inflation, which strips out increases in energy, food, alcohol and tobacco, rose by 1.6 percent and factory gate prices rose by 0.9 percent”?
________ in U.K _____.?
Answer: ?AD or SRAS in U.K does not change (movement).?
5. In U.S., Sales of new cars surged 11.4% on quarter, leading to a 17.0% jump in consumption of durable goods due to boost in consumer sentiment.” ?
_________ in U.S. _____.
Answer: AD in U.S. increases.
PLEASER EXPLAIN WHY THE ANSWERS ARE CORRECT, I DO NOT UNDERSTAND THE CONCEPT
1. SRAS decreases. This is because when wage rate is increased, firms either hire less workers or replace them with capital. Since capital is usually not available in flexible units, this implies a lower production level when cost of production increases. Hence SRAS decreases.
2. AD, decreases. This is perhaps because AD is composed of C + I + G + NX and since there are business pessimism in Germany, German investors are reluctant to invest. So I falls and so AD decreases.
3. AD, increases. If China demans more US made goods, US will produce more goods for exports so exports will rise and since exports are a part of AD, AD increases.
4. The question is suggesting a price increase in UK. Now AD is inveresly related and AS is positively related to price. This shows that if price rises, AD moves down and SRAS moves up.
5. Again consumption is a part of AD as C + I + G = AD. Now in case consumption is increased, AD is increased.