Question

Suppose that the position of a nation's long-run aggregate supply curve has not changed, but its long-run equilibrium price level has increased. Which of the following factors might account for this event?

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

Short answer

a. This is not a reason for an increase in price levels.

b. This is a causative factor for an increase in the price level.

c. This is a causative factor for an increase in the price level.

d. This is a causative factor for an increase in the price level.

e. This is a causative factor for an increase in the price level.

f. This is a not a reason for an increase in the price level.

Step-by-step solution

Long run Equilibrium

The future equilibrium index number has increased with none change within the long-run aggregate supply curve (LRAS). the rise in index number implies that the combination demand ($AD$) curve has shitted rightwards. The change in factors apart from price will cause a rise within the $AD$.

Not a reason (a)

a) An increase within the value of the domestic currency relative to other world currencies will result in an appreciation of domestic currency and depreciation of foreign currency. With appreciation of domestic currency, the entire import demand increase and also the total export demand of the domestic country fall. As a result, there'll a are a fall in aggregate demand. Therefore,the mixture demand curve will shift leftward.
Thus, this is often not a reason for a rise in price levels.

Reason (b) 

b) Arise within the quantity of cash increases the availability of cash within the market. The increased supply of cash ends up in a decrease within the rate of interest. A decline within the rate of interest will result in a rise in investment activities (inverse relationship between rate and investment). This causes a rise within the aggregate demand to shift right from $AD$ to $AD\text{'}$. Thus, this can be a causative factor for a rise within the price index.

Reason (c) and (d)

c) Arise within the labor-force participation rate increases the income level of the economy shifting the $AD$ curve towards its right to AD. Thus, this is often a causative factor for a rise within the indicator.

d) A decrease in tax, increases the income of the individuals causing the $AD$ curve to shift towards its right to $AD\text{'}$. Thus, this factor also causes a rise within the price index.

Reason (e)

e) An increase within the real income of states that are key trading partners will result in a rise in demand for foreign goods by trading partner countries. this is often because witha rise in income, consumers change their taste and preferences and demand more of imported goods.
Partner country imports are domestic country exports. Thus, the web exports of domestic country will increase leading to a rightward shiftwithin the demand curve from$AD$to$AD\text{'}.$
Thus, this factor also causes a rise within the index.

Not a reason (f)

f) a protracted run economic process stabilizesthe costs by shifting the $LRAS$curve towards its right.

As shown within the above figure, with the long-run growth, the long-run aggregate supply curve shifts rightwards from $LRAS$to $LRAS\text{'}$. The future economic process cannot cause a rise inindicator.
Thus, this is often not a reason for a rise in price levels.