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    Shifters of Demand and Supply

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    For each of the following, explain whether it shifts the short-run aggregate supply curve, the long-run aggregate supply curve, or the aggregate demand curve (or more than one of these).

    a. Households decide to save a smaller share of their disposable income.
    b. There is an 8-week strike in the steel industry.
    c. A drought in the Midwest causes poor wheat harvest.
    d. The labor force participation rate increases

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    Solution Preview

    a) Households decide to save a smaller share of their disposable income.
    Sorry this statement is confusing maybe you can clarify.
    "To save a smaller share" means the savings decreased (they used to save a bigger share). In this ...

    Solution Summary

    Supply and demand shifters are factors cause aggregate demand or aggregate supply (AS) to shift to the left or to the right depending on the situation. The sift in AS curve can be temporary (short run) or permanent (long run).

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