Answer to Question #205599 in Economics for alex

Question

Long-Run Aggregate Supply and Short- Run Aggregate Supply: Which Curve Shifts?

In the real world, change is typical. In our aggregate demand–aggregate supply model, change means that the curves shift. Careful application of the model requires that you be able to determine which curve shifts, and in which direction, when real- world events occur.

Question: In each of the scenarios listed below, is there a shift in the long- run aggregate supply curve, the short- run aggregate supply curve, both, or neither? Explain your answer each time.

1. New shale gas deposits are found in North Dakota.

2. Hot weather leads to lower crop yields in the Midwest.

3. The Organization of Petroleum Exporting Countries (OPEC) meets and agrees to increase world oil output, leading to lower oil prices for six months.

4. U.S. consumers expect greater income in 2017

Answer 1

1. If new shale gas deposits are found in North Dakota, then the long-run Aggregate Supply will increase.

2. If hot weather leads to lower crop yields in the Midwest, then the short-run Aggregate Supply will decrease.

3. If the Organization of Petroleum Exporting Countries (OPEC) meets and agrees to increase world oil output, leading to lower oil prices for six months, then the short-run Aggregate Supply will increase.

4. If U.S. consumers expect greater income in 2017, then there will be no change in either long-run or short-run aggregate supply.