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4. What effect would an increase in aggregate supply have on price levels and GDP?

4. What effect would an increase in aggregate supply have on price levels and GDP?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please answer question number 4

Sure! Here's a transcription of the text suitable for an educational website: --- **1. In the following table, determine how each event likely affects potential output (a.k.a., long-run aggregate supply).** | Event | Direction of Potential Output Shift | |-------------------------------------------------------------------------------------------|------------------------------------| | | Left | Right | No Shift | | The government allows more immigration of working-age adults. | | | | | For environmental and safety reasons, the government requires that the country's nuclear power plants be permanently shut down. | | | | | An investment tax credit increases the rate at which firms acquire machinery and equipment. | | | | --- **2. In the following table, determine how each event affects the position of the aggregate demand curve.** | Event | Direction of AD Curve Shift | |-------------------------------------------------------------------------------------------|-----------------------------| | | Left | Right | No Shift | | A decrease in consumer confidence (suggests people believe a contraction/recession is coming) | | | | | A decrease in individual income tax rates | | | | | An increase in the value/price of housing | | | | --- **3. What effect would an increase in aggregate demand have on price levels and GDP?** --- **4. What effect would an increase in aggregate supply have on price levels and GDP?** --- This text includes tables where students can think about and then mark how various economic events might shift potential output or the aggregate demand curve. The questions at the end ask students to consider the broader economic implications of changes in aggregate demand and supply.
Transcribed Image Text:Sure! Here's a transcription of the text suitable for an educational website: --- **1. In the following table, determine how each event likely affects potential output (a.k.a., long-run aggregate supply).** | Event | Direction of Potential Output Shift | |-------------------------------------------------------------------------------------------|------------------------------------| | | Left | Right | No Shift | | The government allows more immigration of working-age adults. | | | | | For environmental and safety reasons, the government requires that the country's nuclear power plants be permanently shut down. | | | | | An investment tax credit increases the rate at which firms acquire machinery and equipment. | | | | --- **2. In the following table, determine how each event affects the position of the aggregate demand curve.** | Event | Direction of AD Curve Shift | |-------------------------------------------------------------------------------------------|-----------------------------| | | Left | Right | No Shift | | A decrease in consumer confidence (suggests people believe a contraction/recession is coming) | | | | | A decrease in individual income tax rates | | | | | An increase in the value/price of housing | | | | --- **3. What effect would an increase in aggregate demand have on price levels and GDP?** --- **4. What effect would an increase in aggregate supply have on price levels and GDP?** --- This text includes tables where students can think about and then mark how various economic events might shift potential output or the aggregate demand curve. The questions at the end ask students to consider the broader economic implications of changes in aggregate demand and supply.
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