If long run aggregate supply curve decreases, real gross domestic product (GDP) and the price level will change in which of the following ways?Elimination Tool
Question
If long run aggregate supply curve decreases, real gross domestic product (GDP) and the price level will change in which of the following ways?Elimination Tool
Solution
The long run aggregate supply (LRAS) curve represents the total quantity of goods and services that firms are willing and able to supply at a given level of technology and resources.
If the LRAS curve decreases, it means that the economy's potential output is reduced. This could be due to a decrease in resources, such as labor or capital, or a decrease in technology.
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Impact on Real GDP: A decrease in LRAS will lead to a decrease in real GDP. This is because there are fewer goods and services being produced and supplied in the economy.
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Impact on Price Level: A decrease in LRAS will lead to an increase in the price level. This is because the decrease in supply of goods and services, with demand remaining constant, will lead to an increase in prices.
So, if the long run aggregate supply curve decreases, real GDP will decrease and the price level will increase.
Similar Questions
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 is true about the long-run aggregate supply curve?it is vertical at the level of potential gdpit does not shift in response to temporary changes in aggregate demandit shows the relationship between the price level and real gdp when wages and other costs are at an equilibrium level.all the above
which of the following is true about the long-run aggregate supply curve?
What does the short-run aggregate supply curve show?Group of answer choicesThe relationship between the price level and the quantity of real GDP suppliedThe relationship between the unemployment rate and real GDPThe desired level of national expenditure at different price levelsThe relationship between labour supplied and the average wage rate
Along the horizontal range of the aggregate supply curve, an increase in the aggregate demand curve will increase:Group of answer choicesboth the price level and real GDP.only real GDP.only the price level.real GDP and reduce the price level.
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