1. Describe the change in short-run aggregate supply that should result from each of the following changes in determinants. Assume that nothing else is changing besides the identified change. (Use "Decrease" or "Increase.") Draw diagram for each case. (a) A rise in the average price of inputs; (b) An increase in worker productivity; (c) Government antipollution regulations become stricter; (d) A new subsidy program is enacted for new business investment in productive equipment; (e) Energy prices decline.
2.a. "A change in aggregate supply implies a change in potential GDP and a change in potential GDP implies a change in aggregate supply." True or False? Explain your answer.
2.b. What factors can cause an increase in aggregate supply? What factors can increase potential GDP?