QUESTION 13 The longrun aggregate supply curve shifts left i

QUESTION 13 The long-run aggregate supply curve shifts left if O the capltal stock increases. O there is a natural disaster o the government removes some environmental regulations that limit production methods. None of the above is correct. QUESTION 14 Suppose a state government imposed at tax on individuals equal to 15% of their first $30,000 of income and 5% of all income above $30,000. This would be an excise tax regressive tax proportional tax progressive tax

Solution

Question 13

Leftward shift of long-run aggregate supply curve happens when production capacity of an economy decreases either due to destruction of production facilities or obsolescence of technology.

Natural disaster tends to destroy the production facilities in an economy and thus reduces productive capacity of the economy. This leads to leftward shift of the long-run aggregate supply curve.

Thus, the correct answer is the option (2).

Question 14

In given case, tax rate is decreasing as the income is increasing.

In a scenario where tax rate decreases as the taxable income increases, taxation system is said to be regressive.

Thus, the correct answer is the option (2).