Give examples of factors that decrease aggregate supply. Which way does the AS curve shift?
What will be an ideal response?
Aggregate supply decreases if potential GDP decreases. A rise in the money wage rate or the money price of other resources such as the price of oil raises firms' costs and decreases aggregate supply. The AS curve shifts leftward.
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Assuming that, over a given period, the value of transactions in current dollars is $8 trillion and the money stock is $500 billion. What is the transaction velocity of money?
a. .0625 b. 12 c. 16 d. None of the above
The economy of Alpha operates according to Okun's law. In Alpha, potential GDP equals $500 billion, actual GDP equals $480 billion, and the natural rate of unemployment is 5 percent. What is the actual rate of unemployment in Alpha?
A. 3 percent B. 7 percent C. 1 percent D. 4 percent
In Minnesota, tax collectors found that threatening late filers with warnings and fines does not increase tax compliance. Instead, they publicized the fact that most Minnesotans had already filled in their returns. What type of nudge is this?
A. There is no nudge involved. B. An information nudge C. An advantageous default option nudge D. A pricing nudge
If the Consumer Price Index decreases, who will be harmed?
A. Savers B. Creditors C. Debtors D. Savers and creditors