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The short run aggregate supply (SRAS) curve is used together with AD to explain the economy in the short-run (over the course of a few years)

Economics Dec 11, 2020

The short run aggregate supply (SRAS) curve is used together with AD to explain the economy in the short-run (over the course of a few years). One or more of the following will move you up along the SRAS curve (that is, as P rises). Which one or ones? firms investing more due to lower interest rates firms investing less due to higher interest rates firms produce more due to a higher prices for produced goods O firms produce less due to a higher prices for produced goods firms cut production due to a higher price of oil (which is turned into gasoline for cars, kerosene for airplanes, and diesel for trucks) firms increase production due to a lower price of oil (which is turned into gasoline for cars, kerosene for airplanes, and diesel for trucks) prices fall and total spending rises O prices rise and total spending falls

Expert Solution

All these options are applicable on SRAS with respect to increase in price causing a shift 1) firms investing more due to lower interest rates- as more money is in supply and circulation

2) firms produce more due to a higher prices for produced goods- possible

3) firms produce less due to a higher prices for produced goods-possible

4) firms cut production due to a higher price of oil (which is turned into gasoline for cars, kerosene for airplanes, and diesel for trucks) this is possible as when price increases the input price will also rise so production will decline.

5) prices rise and total spending falls- yes as price rises spending gets controlled ..........

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