Fill in the table by indicating the changes in the determinants necessary to decrease short-run aggregate supply.Change Needed to Decrease ASInput pricesHuman capitalBurdensome regulations The following graph shows a decrease in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, theshort-run aggregate supply curve shifts to the left from ASi to AS2, causing the quantity of output supplied at a price level of 100 to fall from $200billion to $150 billion.(?200AS217515012510075502550100150200250300350400QUANTITY OF OUTPUTPRICE LEVEL

The aggregate supply curve shows the positive relationship between the price level and the output. Changes necessary to decrease short-run aggregate supply. Input Price - Should Increase Reason: A rise in input price leads to a rise in the cost of production and therefore, the supply curve will shift leftwards resulting in less output at each price level. Human capital - Should Decrease Reason: A decrease in human capital will result in less availability of labor in the labor market as well as it will increase the cost of hiring more labor. Therefore, the firms will reduce their supply. Burdensome regulation - Should Increase Reason: A rise in the burdensome regulations from the government will make it difficult for the firms to carry on production and it will encourage existing firms to leave the market. This will, therefore, reduce the supply and shift the aggregate supply curve leftward.

Answered: Fill in the table by indicating the…

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Fill in the table by indicating the changes in the determinants necessary to decrease short-run aggregate suppl Change Needed to Decrease AS Input prices Human capital Burdensome regulations

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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