Question : The long-run aggregate supply curve is primarily determined by:
Option 1: Labor market conditions
Option 2: Price level
Option 3: Government policies
Option 4: Interest rates
Correct Answer: Labor market conditions
Solution : The correct answer is (a) Labor market conditions.
The long-run aggregate supply (LRAS) curve is primarily determined by labor market conditions. It represents the level of real output an economy can produce when all resources, including labor, are fully utilized and there are no supply-side constraints.
Labor market conditions, such as the quantity and quality of labor, productivity, skills, and technological advancements, play a crucial role in determining an economy's productive capacity in the long run. A larger quantity of skilled and productive labor, along with technological advancements, can increase an economy's potential output.
Changes in labor market conditions can shift the LRAS curve. For example, an increase in the labor force due to population growth or immigration can shift the LRAS curve to the right, indicating an increase in potential output. Similarly, improvements in labor productivity or technological advancements can also shift the LRAS curve to the right.
Question : The aggregate supply, in the long run, is primarily determined by:
Option 1: Resource price
Option 2: Technology
Option 3: Government Policies
Question : The aggregate supply curve in the short run is mainly influenced by:
Option 1: Resource prices
Question : The fiscal policy refers to changes in:
Option 1: Government expenditure and taxation
Option 2: Interest rates and money supply
Option 3: Exchange rates and trade policies
Option 4: Labor market regulations
Question : The aggregate supply curve shows the relationship between:
Option 1: Price level and aggregate demand
Option 2: Price level and real GDP
Option 3: Interest rate and investment expenditure
Option 4: Inflation and unemployment
Question : In a floating exchange rate system, the exchange rate is determined by market forces, and fluctuations in the rate are caused by changes in ________.
Option 1: government policies
Option 2: inflation rates
Option 3: interest rates
Option 4: supply and demand
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