In the Aggregate Demand-Aggregate Supply (AD-AS) model, consider an economy that is initially in long-run equilibrium. Which of the following events is most likely to cause both a leftward shift in the AD curve and a leftward shift in the SRAS (Short-Run Aggregate Supply) curve?This is a multi answer question. You can select one or more options as the answer.A.A global technological breakthrough that benefits all industries.B.A sudden and significant increase in global oil prices.C.A decrease in general consumer confidence across the economy.D.A broad reduction in import tariffs by the government.
Question
In the Aggregate Demand-Aggregate Supply (AD-AS) model, consider an economy that is initially in long-run equilibrium. Which of the following events is most likely to cause both a leftward shift in the AD curve and a leftward shift in the SRAS (Short-Run Aggregate Supply) curve?This is a multi answer question. You can select one or more options as the answer.A.A global technological breakthrough that benefits all industries.B.A sudden and significant increase in global oil prices.C.A decrease in general consumer confidence across the economy.D.A broad reduction in import tariffs by the government.
Solution
The event that is most likely to cause both a leftward shift in the AD curve and a leftward shift in the SRAS curve is "A sudden and significant increase in global oil prices" and "A decrease in general consumer confidence across the economy".
Explanation:
A. A global technological breakthrough that benefits all industries would likely increase productivity, leading to a rightward shift in the SRAS curve, not a leftward shift.
B. A sudden and significant increase in global oil prices would increase the cost of production for many goods, leading to a leftward shift in the SRAS curve. It would also decrease the amount of goods and services that consumers are able to purchase at each price level, leading to a leftward shift in the AD curve.
C. A decrease in general consumer confidence across the economy would decrease consumption spending, leading to a leftward shift in the AD curve. It would not directly affect the SRAS curve, but if firms anticipate a decrease in demand, they may decrease production, which could lead to a leftward shift in the SRAS curve.
D. A broad reduction in import tariffs by the government would likely increase the amount of goods and services available in the economy, leading to a rightward shift in the SRAS curve, not a leftward shift. It could also increase consumption spending, leading to a rightward shift in the AD curve.
Similar Questions
Within the context of the AD-AS Model, if there is a technological breakthrough that boosts productivity across all sectors of an economy, what is the immediate expected impact on the Short-Run Aggregate Supply (SRAS) curve?A.The SRAS curve will shift to the right.B.The SRAS curve will shift to the left.C.The SRAS curve will remain unchangedD.The direction of the SRAS shift is unpredictable.
Which assumption is correct?A.An increase in the interest rate will shift the AD curve to the right.B.The impact of the negative supply shock will shift the SRAS upward.C.Changes in the price level can shift the AD curve.D.The short run aggregate supply curve is vertical.
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, if the central bank implements an expansionary monetary policy (such as lowering interest rates), which of the following options most accurately describes the short-term changes in the Aggregate Demand (AD) curve and the Short-Run Aggregate Supply (SRAS) curve?A.AD shifts to the right; SRAS remains unchanged.B.AD shifts to the left; SRAS shifts to the right.C.AD remains unchanged; SRAS shifts to the left.D.AD shifts to the right; SRAS 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.
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