Problem
Determine whether each of the following would cause a shift of the aggregate demand (AD) curve, a shift of the aggregate supply (AS) curve, neither, or both. Which curve will shift, and in which direction? What will happen to aggregate output and the price level in each case?
A. The price level decreases.
a. Which curve will shift?
b. Which direction does it shift?
c. What will happen to aggregate output?
d. What will happen to the price level?
B. Consumer confidence increases.
a. Which curve will shift?
b. Which direction does it shift?
c. What will happen to aggregate output?
d. What will happen to the price level?
C. The supply of resources decreases.
a. Which curve will shift?
b. Which direction does it shift?
c. What happens to aggregate output?
d. What happens to the price level?
D. The wage rate decreases.
a. Which will curve shift?
b. Which direction does it shift?
c. What will happen to aggregate output?
d. What will happen to the price level?