Question

suppose that the position of a nations long - run aggregate supply (lras) curve has not changed, but its long - run equilibrium price level has increased. a. a rise in the value of the domestic currency relative to other world currencies b. an increase in the quantity of money in circulation c. an increase in the labor force participation rate d. a decrease in taxes e. a rise in real incomes of countries that are key trading partners of this nation f. increased long - run economic growth of the factors given above, which could account for the price level increase with constant lras? a. factors c and f. b. factors a, c, and f. c. factors b, c, d, and f. d. factors b, d, and e.

Explanation:

• a. A rise in domestic - currency value makes imports cheaper and reduces domestic price level.
• b. An increase in money circulation causes more money chasing the same amount of goods, leading to inflation and higher price level.
• c. An increase in labor - force participation rate shifts LRAS rightward, not consistent with constant LRAS.
• d. A decrease in taxes increases aggregate demand, which can raise the price level with constant LRAS.
• e. A rise in real incomes of key trading partners increases demand for domestic goods, raising the price level.
• f. Increased long - run economic growth shifts LRAS rightward, not consistent with constant LRAS.

Answer:

D. Factors b, d, and e.