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Chapter 24: Q 27. (page 602)

Name some factors that could cause the SRAS curve to shift, and say whether they would shift SRAS to the right or to the left.

Short Answer

Expert verified

There are various reasons for this condition to occur.

Step by step solution

01

Step 1. Definition

The SRAS (short-run aggregate supply) curve is a curve that shows that if there is an increase in price level and you will be moving along the SRAS, there will be an increase in the amount of real GDP which will be produced in an economy.

02

Step 2. Explanation

There are various reasons which cause the shift in the SRAS curve.

Reasons when SRAS curve shifts to the right are: improvement in productivity of the economy, decrease in input prices of the firms, good weather make a right shift in SRAS curve.

Reasons when the SRAS curve shifts leftwards are: an increase in the input prices in the economy, and exceptionally bad weather will cause a leftward shift in the SRAS curve.

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Most popular questions from this chapter

Why might it be important for policymakers to know which in zone of the SRAS curve the economy is?

Briefly explain the reason for the near-vertical shape of the SRAS curve on its far right.

The imaginary country of Harris Island has the

aggregate supply and aggregate demand curves as Table 24.3shows.

a. Plot the AD/AS diagram. Identify the equilibrium.

b. Would you expect unemployment in this economy to be relatively high or low?

c. Would you expect concern about inflation in this

economy to be relatively high or low?

d. Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275at every price level.

Identify the new aggregate equilibrium.

e. How will the shift in AD affect the original

output, price level, and employment?

If foreign wealth-holders decide that the United States is the safest place to invest their savings, what would the effect be on the economy here? Show graphically using the AD/AS model.

Suppose the U.S. Congress passes significant immigration reform that makes it more difficult for foreigners to come to the United States to work. Use the AD/AS model to explain how this would affect the equilibrium level of GDP and the price level.
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