The aggregate supply (AS) curve presented in the chapter has its particular shape because of which of the following explanations?Question 10Select one:a.An increase in the nominal wage causes a reduction in the amount of output that firms are willing to produce.b.A reduction in the aggregate price level causes a reduction in nominal money demand and a reduction in the interest rate.c.An increase in the aggregate price level will cause an increase in the interest rate and a reduction in output.d.An increase in output causes an increase in employment, a reduction in unemployment, an increase in the nominal wage and an increase in the price level.
Question
The aggregate supply (AS) curve presented in the chapter has its particular shape because of which of the following explanations?Question 10Select one:a.An increase in the nominal wage causes a reduction in the amount of output that firms are willing to produce.b.A reduction in the aggregate price level causes a reduction in nominal money demand and a reduction in the interest rate.c.An increase in the aggregate price level will cause an increase in the interest rate and a reduction in output.d.An increase in output causes an increase in employment, a reduction in unemployment, an increase in the nominal wage and an increase in the price level.
Solution
The aggregate supply (AS) curve has its particular shape due to the following explanation:
Option d. An increase in output causes an increase in employment, a reduction in unemployment, an increase in the nominal wage, and an increase in the price level.
Here's why:
The AS curve is upward sloping, which means that as the price level rises, the quantity of goods and services that firms are willing to produce also increases. This is because higher prices mean higher profits for firms, which incentivizes them to increase production.
When output increases, firms need more workers to produce the additional goods and services, which leads to an increase in employment and a reduction in unemployment. This increase in demand for labor can push up wages (the nominal wage).
Higher wages can increase costs for firms, which they may pass on to consumers in the form of higher prices, leading to an increase in the price level. This relationship between output, employment, wages, and prices is what gives the AS curve its particular shape.
Similar Questions
The aggregate supply curve will shift up when which of the following occurs?Question 20Select one:a.an increase in the expected price levelb.a decrease in unemployment benefitsc.a decrease in firm's markup over labour costsd.All of the above.e.None of the above.
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The upward sloping segment of the aggregate supply curve is where:Question 35Select one:a.substantial growth of real GDP can be produced without any increase in the price level (inflation).b.increased price levels result in a corresponding increased real output in the economy.c.price levels (inflation) can rise without increases in real output in the economy.d.is when all available labor resources are being used in the most efficient way possible.e.no growth of real GDP can be produced even with increases in the price levels.
Which of the following will result in a shift in the aggregate supply curve?Question 30Select one:a.changes in spending by businesses. b.changes in spending by foreign buyers.c.changes in spending by the government.d.changes in spending by consumers.e.changes in input prices.
In the AS-AD model presented in lectures, the money wage rate is _________ along the Short-Run Aggregate Supply (SAS) curve and a change in the money wage rate causes a __________ of the SAS curve
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