Question

How does the aggregate supply (AS) curve in Xurbia change when input prices within its agricultural sector decrease?

a. It shifts the AS curve to the right
b. It shifts the AS curve to the left
c. It has no effect on the AS curve
d. It depends on other economic factors

Answer 1

When input prices within the agricultural sector decrease in Xurbia, it will shift the Aggregate Supply (AS) curve to the right. This means that producers will be willing and able to supply a greater quantity of real GDP at every price level.

Step-by-step explanation:

When the input prices within the agricultural sector decrease in Xurbia, it will shift the Aggregate Supply (AS) curve to the right.

A decrease in input prices means that producers can produce goods and services at a lower cost, which leads to an increase in their profitability. As a result, producers will be willing and able to supply a greater quantity of real GDP at every price level.

For example, if the cost of agricultural labor or raw materials decreases in Xurbia, farmers and agricultural companies will be able to produce more crops or livestock at a lower cost, resulting in an increase in the aggregate supply of goods and services in the economy.