Question

Choose whether the variable described on the left is a variable that increases AD or AS Discoveries of new raw material [ Choose ] Variable Increases AS Variable Decreases AS An increase in the amount of Variable Decreases AD money in circulation Variable Increases AD Improvements in economic conditions in other countries [Choose An increase in the supply of labor [Choose Increased competition [Choose) A drop in the foreign exchange value of the dollar [Choose] < Increased security about jobs and future income [Choose] A reduction in input prices [Choose) Increased training and education [Choose A reduction in international trade barriers [Choose)

Answer 1

1) discoveries of new raw material is a Variable Increases AS because discoveries of new raw material would lead to surplus of raw material and decrease in the price of raw material decreasing the cost of production.

2) an increase in the amount of money in circulation– Variable Increases AD. This is because an increase in the money supply would lead to to increase in investment spending and aggregate demand by lowering the interest rate.

3) improvement in economic conditions in other countries– variable Increases AD. ​​​​​​ An improvement in economic conditions in other countries leads to an increase in the net exports of the US and Increases AD.

4) an increase in the supply of labour– Variable Increases AS. Increase in the supply of labour leads to to a decrease in the real wage rate which decreases the cost of production and increases the employment and thus raising the output.

5) Increased Competition– Variable Increases AS. Increased competition leads to to an increase in output in the economy as the producers produce the Efficient level of output.

6) A drop in the foreign exchange value of dollar– Variable Increases AD. A drop in the foreign exchange value of dollar leads to an increase in the net exports and aggregate demand.

7) increased security about jobs and future income– Variable Increases AD. Increase security about jobs in future income leads to an increase in the consumer spending and aggregate demand.

8) A reduction in input prices– Variable Increases AS. Reduction in input prices reduces the cost of production and Increases output.

9) increased training and education– Variable Increases AS. Increased training and education leads to an increase in the efficiency of the work force which leads to an increase in output with the same amount of inputs.

10) A reduction in international trade barriers– Variable Increases AD. Reduction in international trade barriers leads to an increase in net Exports as US can now freely export more.