Question : Statement 1: Changes in government regulations affect aggregate demand.
Statement 2: Changes in resource availability affect aggregate supply.
Which statement is correct?
Option 1: Only Statement 1
Option 2: Only Statement 2
Option 3: Both Statement 1 and Statement 2
Option 4: Neither Statement 1 nor Statement 2
Correct Answer: Both Statement 1 and Statement 2
Solution : The correct answer is (C). Both Statement 1 and Statement 2 are correct.
Statement 1 is correct. Government regulations can have an impact on various factors that influence aggregate demand, such as consumer behavior, business investment decisions, and the overall economic environment. Changes in regulations can affect market conditions, business operations, and consumer confidence, thereby influencing aggregate demand.
Statement 2 is also correct. The availability of resources, including natural resources, labor, capital, and technology, is a key determinant of aggregate supply. Changes in resource availability can affect the cost of production, production capacity, and technological advancements, all of which can influence aggregate supply.
Therefore, the correct answer is C) Both Statement 1 and Statement 2. I apologize for the confusion caused by my previous response.
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Statement 2: Changes in resource prices affect aggregate supply.
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