Question

For each of the following events, indicate whether it is a demand-side or a supply-side change and how the event affects that side of the economy. a. Consumers become more pessimistic about the economy. Demand decreases. Demand increases. Supply decreases. Supply increases. b. Technological changes enable workers to be more productive._____ Demand increases. Demand decreases. Supply increases. Supply decreases. c. Manufacturing firms expect steel prices to decrease significantly. ____Demand decreases. Supply decreases. Demand increases. Supply increases. d. The Affordable Care Act is amended to require employers to provide health insurance to part-time as well as full-time employees. ___Demand increases. Demand decreases. Supply decreases. Supply increases. e. Government spending increases.___ Demand increases. Demand decreases. Supply decreases. Supply increases. f. A cyclone destroys manufacturing plants.____ Supply decreases. Supply increases. Demand decreases. Demand increases. g. A stock market crash reduces people's wealth. ____ Supply decreases. Supply increases. Demand decreases. Demand increases. h. The spread of democracy around the world increases consumer confidence in the united States.____ Supply decreases. Supply increases. Demand decreases. Demand increases. i. The United States enters into an arms race with China, resulting in a significant increase in military spending. ____ Supply decreases. Supply increases. Demand decreases. Demand increases. j. A revolution in Iran results in a significant reduction in the world's supply of oil. ____ Supply decreases. Supply increases. Demand decreases. Demand increases k. A new computer chip is developed that is faster and cheaper than previous chips. _____ Supply decreases. supply increases. Demand decreases. Demand increases

Answer 1

Answer-(a) If the consumers become more pessimistic about the economy, the aggregate demand decreases.

Answer-(b) Technological changes enable workers to be more productive, supply increases , it means an effective and efficient use of technology will increase the supply.

Answer-(c) Manufacturing firms expect steel prices to decrease significantly supply increases , if the input cost reduces therefore at each price producers need to sell their good for less money. So an decrease in price of inputs lead to an increase in supply.

Answer-(d) The Affordable Care Act is amended to require employers to provide health insurance to part-time as well as full-time employees, so the demand increases of health insurance.

Answer-(e) Government spending increases is likely to cause a rise in aggregate demand, it means demand increases.

Answer-(f) A cyclone destroys manufacturing plants results supply decreases .

Answer-(g) A stock market crash reduces people's wealth, means that people have less income available for consumption on all goods, as a results demand decreases.

Answer-(h) The spread of democracy around the world increases consumer confidence in the united States, as a result, aggregate demand shift to right, it means demand increases.

Answer-(i) The United States enters into an arms race with China, resulting in a significant increase in military spending, as a result, aggregate demand shift to the right, it means demand increases.

Answer-(j) A revolution in Iran results in a significant reduction in the world's supply of oil, as a result, aggregate supply curve shifts to the left, that means supply decreases.

Answer-(k) A new computer chip is developed that is faster and cheaper than previous chips, its result supply curve shifts to the right, supply increase.