In the AD-AS model, a simultaneous increase in consumer confidence (leading to more consumption) and a technological breakthrough (leading to more productive capabilities) will have which of the following effects on the Aggregate Demand (AD) curve and the Long-Run Aggregate Supply (LRAS) curve?This is a multi answer question. You can select one or more options as the answer.A.AD shifts to the right; LRAS remains unchanged.B.AD shifts to the left; LRAS shifts to the right.C.AD shifts to the right; LRAS shifts to the right.D.AD remains unchanged; LRAS shifts to the left.
Question
In the AD-AS model, a simultaneous increase in consumer confidence (leading to more consumption) and a technological breakthrough (leading to more productive capabilities) will have which of the following effects on the Aggregate Demand (AD) curve and the Long-Run Aggregate Supply (LRAS) curve?This is a multi answer question. You can select one or more options as the answer.A.AD shifts to the right; LRAS remains unchanged.B.AD shifts to the left; LRAS shifts to the right.C.AD shifts to the right; LRAS shifts to the right.D.AD remains unchanged; LRAS shifts to the left.
Solution
The correct answer is C. AD shifts to the right; LRAS shifts to the right.
Here's why:
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An increase in consumer confidence leads to more consumption. When consumers are more confident, they spend more. This increase in spending leads to an increase in aggregate demand. In the AD-AS model, this is represented by a shift of the AD curve to the right.
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A technological breakthrough leads to more productive capabilities. This means that the economy can produce more goods and services with the same amount of resources. This increases the long-run aggregate supply. In the AD-AS model, this is represented by a shift of the LRAS curve to the right.
So, both the AD and LRAS curves shift to the right.
Similar Questions
We know the long-run aggregate supply curve in the AD-AS model can shift. Which of the following situations will not result in a shift of the LRAS curve? The interruption of production due to a cyclone. Automation which improves productivity. An influx of highly skilled workers through immigration. Changes in the endowment of natural resources. Changes in technology levels.
In the AD-AS (Aggregate Demand - Aggregate Supply) model, assume the economy is initially at a long-run equilibrium. Suddenly, a major technological breakthrough occurs, leading to higher productivity across industries. Which of the following is the most likely immediate result in the AD-AS model?A.Aggregate demand (AD) shifts to the right.B.Aggregate supply (AS) shifts to the right.C.Aggregate demand (AD) shifts to the left.D.Aggregate supply (AS) shifts to the left.
In the AD-AS model, which of the following events would most likely shift the Aggregate Demand (AD) curve to the right?A.An increase in consumer confidence. B.A. An increase in taxes. C. B. A decrease in government spending.D.D. An increase in the price level.
According to the AD-AS (Aggregate Demand-Aggregate Supply) Model, which of the following statements is true?A.A) An increase in government spending will always result in higher inflation and output in the short run.B.A shift to the left of the short-run aggregate supply curve will lead to higher long-run economic growth.C.An increase in aggregate demand will only affect the price level in the long run, not in the short run.D.A decrease in the money supply will shift the aggregate demand curve to the right.
In the AS-AD model presented in lecturesX: a decrease in the price of variable inputs will shift the Short-Run Aggregate Supply (SAS) curve to the left; andY: a collapse of business confidence will shift the Aggregate Demand (AD) curve to the right.
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