(Figure: Determining SRAS Shifts 2) Consider the Shift in Aggregate

question 34

Multiple Choice

(Figure: Determining SRAS Shifts 2) Consider the shift in aggregate supply shown in the accompanying figure. Which of these might cause this change in short-run aggregate supply?

• A) Unions successfully negotiate higher wages.
• B) Businesses are increasingly optimistic about the future.
• C) Incomes of consumers decrease.
• D) Taxes on businesses increase.

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Definitions:

Equilibrium Price

The price point in the market at which the supply of goods matches the demand for those goods.

Price Floor

A government-set minimum price for goods or services, above the market equilibrium price, aimed at preventing prices from falling too low.

Price Controls

Government-imposed limits on prices charged for goods and services to manage economy.

Deadweight Loss

A reduction in economic effectiveness that happens when a good or service does not reach or cannot reach its equilibrium.