Answer to Question #102228 in Macroeconomics for sujan

Question

Draw an aggregate demand/aggregate supply diagram where equilibrium occurs below full employment level of output. Now show the impact of a leftward shift in the aggregate supply curve. What developments might cause such a shift

Answer 1

At point C. A new equilibrium, a shift in the aggregate supply to the left.The following events that can shift the aggregate supply to the left: a sharp increase in energy resources, a sharp increase in basic materials for production, natural disasters, adoption of laws on environmental protection, etc.These above events contribute to higher costs and lower production volumes, higher prices and higher inflation.