Step 1
Work It Out
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You must read each slide, and complete any questions on the slide, in sequence.
In the short run, determine whether the events cause a shift of a curve or a movement along a curve. Determine which curve is involved and the direction of the change.
As a result of an increase in the value of the dollar in relation to other currencies, American producers now pay less in dollar terms for foreign steel, a major commodity used in production. This will cause a the aggregate curve to the .
Incorrect. As the value of the dollar in terms of other currencies increases and American producers pay less in dollar terms for foreign steel, producers’ profit per unit increases and they are willing to supply a greater quantity of aggregate output at any given aggregate price level. The short-run aggregate supply curve will shift to the right. For further review see the section, “The AD-AS Model.”
Correct. As the value of the dollar in terms of other currencies increases and American producers pay less in dollar terms for foreign steel, producers’ profit per unit increases and they are willing to supply a greater quantity of aggregate output at any given aggregate price level. The short-run aggregate supply curve will shift to the right. For further review see the section, “The AD-AS Model.”
As a result of an increase in the value of the dollar in relation to other currencies, American producers now pay less in dollar terms for foreign steel, a major commodity used in production. This will cause a ______ the aggregate ______ curve to the ______.
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