Answer to Question #242889 in Macroeconomics for Ch 29 (2)

Question

Which of the following events would not involve a supply shock that would shift the aggregate supply curve? 

(i) The Cosatu union disintegrates and the minimum wage is abolished. 

(ii) African bank plc’s bad debt creates a financial crisis and that leads to reduction in money supply. 

(iii) 2016 drought destroys half of the crops farmed. 

(iv) A tax on sugar is levied on companies that produce sugary beverages.

Only iii and iv are correct.

Only i and ii are correct.

Only ii is correct.

Only ii and iv are correct.

Answer 1

Only ii is correct.

African bank plc’s bad debt creates a financial crisis and that leads to reduction in money supply.