a) Provide a factor that would shift the long-run aggregate supply (LRAS) curve to the right.
What does this shift in LRAS imply for aggregate output? Use the Aggregate Demand and Supply
model to illustrate this event. Make sure you properly label all the axes and curves. (You only need
to draw a shift in LRAS curve, no need to draw other curves).
b) Provide a factor that would shift the short-run aggregate supply (SRAS) curve upward (and to
the left). What does this shift in SRAS imply for inflation rate? Use the Aggregate Demand and
Supply model to illustrate this event. Make sure you properly label all the axes and curves. (You
only need to draw a shift in SRAS curve, no need to draw other curves).
a) A factor that would shift the long run supply curve ( LRAS) Curve to the right-------
Increase in the Factors of production ( land, labour, capital)
* The shift in LRAS implies that aggregate output will increase.
See the graph (a)-------
Along x axis, real output.
Along yaxis, general price level
Aggregate demand ( AD) Curve is negetively sloped
LRAS is vertical line along y axis, Because in the long run ,all factors are Fully employed.
With LRAS shifting rightward, the Equilibrium point emerges E¹ due to intersaction of LRAS¹ & AD
The potential real output increases
b) A Factor that would shift the short run aggregate supply ( SRAS) Curve upwards to the left----see graph (b)
Increase in the input price
( Increase in input price,say price of raw material ,raises cost of production and Decreases Profit margin, thats why's SRAS curve shifts leftwards.)
* This shift in SRAS imply for Inflation rate that-----
Inflation rate will rise
( Reason------
SRAS is upward sloping curve in the short run.
AD curve cuts at point E, forming Equilibrium output Y and Equilibrium price i
With rise in input price , AS will shift leftward and new equlibrium point comes to E¹
It makes real output Y¹( decreased)
Price level goes up to i¹
As price level Increases, and real GDP decreases, it means the Inflation rate has risen
a) Provide a factor that would shift the long-run aggregate supply (LRAS) curve to the right....
Question 1: AD-SRAS-LRAS Model Using aggregate demand (AD), short-run aggregate supply (SRAS) and long-run aggregate supply (LRAS) curves, graphically illustrate the effect of an increase in the money supply on output and prices in the short and long run. Assume that the economy is initially in long run equilibrium at the potential output level and prices are fixed in the short-run. In your graph, label "A" for the initial equilibrium, "B' for the short-run equilibrium, and "C" for the long-run equilibrium.
Describe the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve. A. the SRAS curve is horizontal and the LRAS curve is upward sloping B. the SRAS curve is horizontal and the LRAS curve is vertical C. the SRAS curve is vertical and the LRAS curve is horizontal D. the SRAS curve is vertical and the LRAS curve is upward sloping Why is the short-run aggregate supply curve horizontal? A. because output is fixed in the short...
supply curve to shift leftward to SRAS, as shown in the graph at right. The economy is currently in short-run equilibrium at point E, and the reduction in supply is expected to be permanent. LRAS SRAS SRAS 1.) Using the line drawing and/or 3-point curved line drawing tool, show the adjustment to long-run equilibrium in this situation. Properly label your new curve(s). 2.) Using the point drawing tool, identify the new long-run equilibrium point and label the point 'E2 Carefully...
Using the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply (LRAS) curves, briefly explain how an open market purchase will affect the equilibrium price level (P) and real output (Y) in the short run. Assume the economy is initially in a recession?
*This is from the most recent quarter of 2019* Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States. Your graph needs to be clearly labeled and explained in some detail. Make sure that your graph includes an aggregate demand (AD) curve, a short run aggregate supply (SRAS) curve, and a long run aggregate supply curve (LRAS, Potential GDP) curve. You should clearly...
Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States. The Aggregate Demand/Aggregate Supply Model is first explained in Chapter 11of your text. Carefully explain your graph.You should draw your own AD/AS graph which you can then scan and paste into your post. Your graph needs to be clearly labeled and explained carefully. Make sure that your graph includes an aggregate demand (AD)...
An adverse supply shock would shift: a. only the long-run aggregate supply curve inward. b. only the short-run aggregate supply curve inward. c. both the long-run and the short-run aggregate supply curves inward. d. only the short-run aggregate supply curve outward. e. only the long-run aggregate supply curve outward.
The following figure depicts the aggregate demand (AD), the short-run aggregate supply (SRAS), and the long-run aggregate supply (LRAS) curves for an economy. The economy is initially at long-run equilibrium, at point A. Suppose that there is an increase in the amount of investment in the economy due to a reduction in the real interest rate. This increase in investment shifts the AD curve to the right, depicted below in the movement of the economy from point A to point...
During a recession consumption falls, causing the aggregate demand curve to shift to the ________. In response, the government can increase government spending to shift the ________. a. left; aggregate demand (AD) curve to the right b. left; short-run aggregate supply (SRAS) curve to the right c. right; aggregate demand (AD) curve to the left d. right; short-run aggregate supply (SRAS) curve to the right e. left; long-run aggregate supply (LRAS) curve to the right
QUESTION 7 (25 points): Economic Fluctuation using AD-AS framework Suppose that the short-run aggregate supply curve has a positive slope and that the economy starts at a long-run equilibrium. Now imagine that 10 million people move to Australia they found that Australians live an average of 10 extra years due to the relax lifestyle that they enjoy. This is a permanent change in Labor in the U.S. economy. (a) (10 points) No Policy Intervention: Using the model of Aggregate Demand...