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The following list contains items that are related to aggregate demand and/or aggregate supply. Government Spending...

The following list contains items that are related to aggregate demand and/or aggregate supply.

  1. Government Spending
  2. Consumer Expectations
  3. Degree of Excess capacity
  4. Personal Income Tax Rates
  5. Productivity
  6. National Income Abroad
  7. Business Taxes
  8. Domestic Resource Availability
  9. Price of Imported Products
  10. Profit Expectations on Investments

Refer to the above list. Changes in which of the above two factors would most likely cause a change in aggregate supply?

Multiple Choice

  • 8 and 9

  • 3 and 10

  • 5 and 7

  • 1 and 5

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Answer #1

Answer : The answer is "5 and 7".

When productivity increase then aggregate supply imcrease and when productivity decrease then aggregate supply decrease. Therefore, option 5 is correct.

When business tax increase then production decrease which decrease the aggregate supply. Again when business tax decrease then production increase which increase aggregate supply. Therefore, option 7 is correct.

Hence the answer is "5 and 7".

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