Describe the change in aggregate supply that should result from each of the following changes in determinants. Assume that nothing else is changing besides the identified change. (In your answer, indicate whether the change will "Decrease" or "Increase" aggregate supply or have no effect.) (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.
Describe the change in aggregate supply that should result from each of the following changes in determinants. Assume that nothing else is changing besides the identified change. (In your answer, indicate whether the change will "Decrease" or "Increase" aggregate supply or have no effect.) (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.
Chapter18: Debates In Macroeconomics Over The Rolse And Effects Of Government
Section: Chapter Questions
Problem 2WNG
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Describe the change in
(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.
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Step 1: AD-AS equilibrium:
VIEWStep 2: Effect of a rise in input price:
VIEWStep 3: Effect of an increase in labor productivity:
VIEWStep 4: Effect of a stricter govt regulation:
VIEWStep 5: Effect of a subsidy program for new businesses:
VIEWStep 6: Effect of a decrease in energy prices:
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