Use the AD-AS model in the figure below to answer the following questions.Price levelLRASAS*AD,AD₂AD₁Real GDPSuppose this economy is operating at point B, if there is an increase in the price of inputs, then in the shortand in the long run. . . .runa) real GDP falls and the price level rises; real GDP is below its original level with a higher pricelevelb) real GDP rises and the price level falls; real GDP and the price level return to their original levelsc) real GDP and the price level both rise; real GDP is above its original level with a higher price leveld) real GDP falls and the price level rises; real GDP is at its original level as a result of the factorprice adjustment processe) real GDP and the price level both rise; real GDP returns to its original level with a higher pricelevel

The AD-AS model represents the relationship between aggregate demand (AD) and aggregate supply (AS)…

Answered: Use the AD-AS model in the figure below…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply

Section: Chapter Questions

Problem 20E

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Consider the graph below. Suppose that the economy is at point A Price Level LRAS SRAS A AD + Y (GDP) Currently, this economy Select in the long run, what will happen in this economy? The ISelect) curvets) will ISelect) because ISelect The price level will Select) GDP will (Select)
Illustrate and interpretthe short-run andlong-run aggregatesupply curves
What is the role of daynamic in macroeconomic? What are the diffrence between static and daynamic?
Identify three factors that can shift the aggregatedemand curve to the right and three different factorsthat can shift the aggregate demand curve to the left
In 2013, Prussia's aggregate demand curve was determined by the equation M + 1-4% A change in aggregate demand means that in 2014, Prussia's aggregate demand curve was determined by the equation Using this information, draw Prussia's old and new dynamic aggregate demand curves on the graph Which of the factors could have resulted in the change irn aggregate demand seen between 2013 and 2014? 13 AD 2013 an improvement in technology O an increase in imports O higher consumer confidence O a decrease in oil prices 12 AD 2014 10 8 5 4 3 2 4 -3 2 1 0 1 2 3 4 5 6 78 9 10 Real GDP growth rate
Explain the effect of the following on price and real income based on AD-AS diagram.Draw and explain the diagram for each part (a) Prediction of World War 3 next year (b) Consumer are optimistic of the economy (c) The government has increased sales and service tax (d) The minimum age for working has been reduced
The following graph shows aggregate demand and short-run aggregate supply. Price level 1.) Use the line drawing tool to show the effect of an adjustment of workers and firms to a higher than expected price level. Properly label this line. SRAS, 2.) Use the point drawing tool to show the new equilibrium price level and real GDP. Label this point 'B'. Carefully follow the instructions above, and only draw the required objects. A ADO
Create a graph for an aggregate demand curve. Use the variable ‘Price Level’ for the vertical axis and ‘Real GDP’ for the horizontal axis. In your answer, explain why there is an inverse relationship between the price level and real GDP. Use your graph to illustrate your explanations. Also, discuss determinants of Aggregate Demandor factors that shift Aggregate Demand curve.
Use the following diagram to answer this question Price level or GDP deflator Ro 41- SRAS₂ ----- AD₂ SRAS, SRAS, -11110 AD₁ AD₁ Output or RGDP Suppose the short-run macroeconomic equilibrium is at point A. In the short run, an open market sale would move the equilibrium to: O A. point E OB. point C O C. point H O D. point B 10
Suppose that a decrease in the demand for goods and services pushes the economy into arecession. In your own words, explain what happens to the price level and real GDP? Explainhow the economy will eventually get back to the potential output?
What are the factors other than price that can shift aggregate demand curve interms of investment and consumption? Also explain graphically.
In the above figure; when the economy is in a longr run equabrium, the price level will be 90 . 110. 120, 100

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