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    Shifts in the Aggregate Demand and Supply Curves

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    Determine whether each of the following would cause a shift of the aggregate demand curve, the aggregate supply curve, neither, or both. What happens to aggregate output and the price level in each case?

    a. The price level change
    b. Consumer confidence declines
    c. The supply of resources increases
    d. The wage rate increase.

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    Answer (a):
    If the price level changes, then as per the "Law of Demand", the quantity demanded changes. Similarly with a change in the price level, the quantity supplied changes. AD and AS curve can both shift with the increase or decrease in prices. The impact ...

    Solution Summary

    The solution discusses shifts in the aggregate demand and supply curves.