Which direction would these changes cause the aggregate supply curve to shift? Explain answers.

Question

A) The price of gasoline increases because of a catastrophic oil spill in Alaska.

B) Labor unions and all other workers agree to a cut in wages to stimulate economy.

C) Power companies switch to solar power, and the price of electricity falls

D) The federal government increases the excise tax on gasoline in order to finance a deficit.

Answer 1

A) Aggregate supply shock - leftward shift of AS.

B) Positive AS shock, lower factor prices - rightward shift of AS.

C) Positive AS shock, lower factor prices - rightward shift of AS.

D) Negative AS shock - leftward shift of AS.