Answer to Question 1
The variables that will cause the short-run aggregate supply to shift are: the size of the labor force, the size of the capital stock, productivity, the expected future price level, workers and firms adjusting to having previously underestimated the price level, and the expected price of an important natural resource. Increases in the labor force, the capital stock, or productivity will cause the short-run aggregate supply curve to shift to the right. Increases in the expected future price level, increases in the price of an important natural resource, and workers and firms adjusting to having previously underestimated the price level will cause the short-run aggregate supply curve to shift to the left.
Answer to Question 2
Three examples of price indices are the GDP deflator, the consumer price index, and the producer price index. All three differ by the kinds of goods that are contained in the market basket that is used to calculate the average level of prices. The GDP deflator is based on the average price of all final goods and services produced. The consumer price index is based on the average price of 211 goods/services purchased by the typical urban family of four. The producer price index is based on the prices received by producers of goods and services at all stages of the production process.
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