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Macroeconomics
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Question 1
1. Price changes do not cause any shifts in the aggregate demand and supply curve. Instead,
they cause movements along the curves, depending on the nature of the change (Dean et al.,
2020). An increase in prices causes an upward movement to the left along the demand curve,
indicating a decrease in the quantity demanded. Meanwhile, the increase causes an upward
movement to the right, indicating an increase in the quantity supplied.
2. Increased consumer confidence causes a shift to the right in the aggregate demand curve.
This is because consumers develop more preference for commodities. Hence, the positive
changes in taste cause an increase in the quantity demanded at every price level, shifting the
aggregate demand curve to the right.
3. A decrease in the supply of resources causes the aggregate supply curve to shift to the left.
Reduced input levels (resources) mean lower levels of production...
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