Question

Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, a shift in neither curve, or a shift in both curves. If a shift is caused, indicate which curve shifts, and in which direction it shifts. What happens to aggregate output and the price level in each case?

1] The price level changes.

2] Consumer confidence increases.

3] The supply of resources decreases.

4] The wage rate decreases.

Answer 1

The aggregate supply aggregate demand model explains how the extent of price and output are determined in an economy. It uses the mixture supply curve and aggregate demand curve to point the equilibrium price and output.
Aggregate demand: The demand of the final goods which are produced in the economy in a given year.
Aggregate supply: Aggregate supply curve shows the connection between the products supplied by nations' suppliers and nation's overall price index .

1.To determine The shifts and directions of aggregate demand and provide curve when the worth level changes and its effect to output and price index . Changes in supply and demand impact the worth of products and services. However, in the most general sense or cases (that is under ceteris paribus conditions), an increase in aggregate demand corresponds or coincides with an increase in the price level.Increasing any of these components shifts the AD curve to the proper , resulting in a greater real GDP and to upward pressure on the worth level. Reducing or decreases any of the components shifts the AD curve to the left, resulting in a lower real GDP and a lower cost level.

2.To determine The shifts and directions of aggregate demand and supply curve when the consumer confidence increases and its effect to output and price level. If, consumer confidence is bound to increase. The household sector is thus inclined to spend freely, especially on durables like cars, houses, furniture, and appliances. The result's that this increase in consumer confidence causes a rise in consumption expenditures and subsequently a rise aggregate demand. An increase in consumer confidence causes a rise (rightward shift) of the mixture demand curve. A decrease in consumer confidence causes a decrease (leftward shift) of the mixture demand curve. If buyers find that they "like" an honest more, then their demand increases.

3.To determine the shifts and directions of aggregate demand and supply curve when the supply of resources decreases and its effect to output and price level. Lower Resource is a decrease in resource prices causes an increase in supply and a rightward shift of the supply curve. With the lower prices, cost falls and therefore the ability to supply the great is enhanced. As such sellers sell more of the good.decrease in any of the resource prices causes a decrease the production cost. Suppose, for instance , that the worth of thread wont to stitch together Stuffed Amigos declines. If the price remains not constant,then the supply decreases.

4.To determine The shifts and directions of aggregate demand and supply curve when the wage rate decreases and its effect to output and price level. An upward curve within the wages causes a decrease (leftward shift) of the short-run aggregate supply curve. A decrease within the wages causes a rise (rightward shift) of the short-run aggregate supply curve. Higher wages increase the overall cost production. Lower wages decrease the overall cost(revenue) production