Question : Statement 1: A decrease in government regulations will lead to a rightward shift in the aggregate supply curve.
Statement 2: An increase in consumer savings will lead to a leftward shift in the aggregate demand curve.
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:
Only Statement 1
Solution : The correct answer is (A) Only Statement 1
Statement 1 is correct. Government regulations can impose restrictions and additional costs on businesses, affecting their ability to produce goods and services. When government regulations decrease, it can lead to increased efficiency and flexibility for businesses, resulting in a higher level of aggregate supply. This causes a rightward shift of the aggregate supply curve, indicating an increase in the total supply of goods and services at each price level.
Statement 2 is incorrect. An increase in consumer savings does not directly lead to a leftward shift in the aggregate demand curve. Consumer savings represent a portion of income that is not immediately spent on consumption. While increased savings can potentially affect consumption patterns, it does not necessarily cause a shift in the aggregate demand curve. Changes in aggregate demand are typically influenced by factors such as consumer spending, investment, government spending, and net exports.
Therefore, only Statement 1 is correct, while Statement 2 is not.
Related Questions
Trending Articles/News
