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5 December, 10:23

Identify how each of the scenarios affects the short‑run aggregate supply curve.

a. The U. S. government increases the minimum wage.

b. Widespread adoption of the Internet by businesses increases productivity and efficiency.

c. The government decreases the payroll tax paid by employers.

d. A financial crisis causes businesses to anticipate a recessionary economy within the coming months.

e. The U. S. government decreases the personal income tax rate paid by households.

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  1. 5 December, 14:10
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    b), c) : Increase Aggregate Supply

    a), d) : Decrease Aggregate Supply

    e) No change in Aggregate Supply

    Explanation:

    Short Run aggregate supply (AS) is the total amount of goods & services produced by all buyers & sellers of an economy during a period of time.

    a) The U. S. government increases the minimum wage : Increase in wage costs reduces profit, so it reduces AS

    b) Widespread adoption of the Internet by businesses increases productivity and efficiency : Improvement in technology & efficiency increases profit margin, so it increases AS

    c) The government decreases the payroll tax paid by employers : Decrease in employers tax cost reduces profit, so it increase AS

    d) A financial crisis causes businesses to anticipate a recessionary economy within the coming months : Expectation of recessionary period with low demand make producers pessimist, so reduce AS

    e) The U. S. government decreases the personal income tax rate paid by households : Personal tax effects consumers & not buyers, so it doesn't effect AS
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