The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from AS1AS1 to AS2AS2, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion.

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Determinants of aggregate supply

The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from AS1AS1 to AS2AS2, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion.
 
 
The following table lists several determinants of short-run aggregate supply.
 
Complete the table by selecting the changes in each scenario necessary to increase short-run aggregate supply.
 
Change Necessary to Increase AS
Technology    (DECLINES or IMPROVES) 
Human capital     (IMPROVES or DECLINES)
Inflation expectations     (HIGHER or LOWER)
PRICE LEVEL
200
175
150
125
100
75
50
25
0
I
I
I
I
50 100 150 200 250
QUANTITY OF OUTPUT
AS₁
AS₂
300
350
400
?
Transcribed Image Text:PRICE LEVEL 200 175 150 125 100 75 50 25 0 I I I I 50 100 150 200 250 QUANTITY OF OUTPUT AS₁ AS₂ 300 350 400 ?
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