Which of the following would indicate economic growth has declined?Elimination ToolSelect one answerAThe money supply curve shifts to the right.BThe long-run aggregate supply curve shifts to the left.CThe aggregate demand curve shifts to the right.DThe short-run Phillips curve shifts to the left.EThe money demand curve shifts to the left.
Question
Which of the following would indicate economic growth has declined?Elimination ToolSelect one answerAThe money supply curve shifts to the right.BThe long-run aggregate supply curve shifts to the left.CThe aggregate demand curve shifts to the right.DThe short-run Phillips curve shifts to the left.EThe money demand curve shifts to the left.
Solution
The answer is B. The long-run aggregate supply curve shifting to the left would indicate that economic growth has declined.
Here's why:
A. The money supply curve shifting to the right indicates an increase in the money supply, not necessarily a decline in economic growth.
B. The long-run aggregate supply (LRAS) curve shifting to the left indicates a decrease in the potential output over time, which is a sign of declining economic growth. The LRAS curve represents the total amount of goods produced by an economy at full capacity in the long run. If it shifts to the left, it means the economy's capacity to produce goods and services has decreased.
C. The aggregate demand curve shifting to the right indicates an increase in total demand for goods and services in an economy, which usually signals economic growth, not a decline.
D. The short-run Phillips curve shifting to the left could indicate lower inflation or lower unemployment, but not necessarily a decline in economic growth.
E. The money demand curve shifting to the left indicates a decrease in the demand for money, which could be due to various factors, but it doesn't directly indicate a decline in economic growth.
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