Question

The economy of Ashenvale is currently in a short-run equilibrium, depicted by point "Eo" on the graph The economy is currently experiencing a recessionary gap The size of this gap is $ If there is no intervention, the level of actual unemployment will Economy of Ashenvale 2,400 Y* 2,000 1,600 Vthe 1,300 natural level of unemployment As factor prices change, the unit cost of production will Firms will respond to these chagig ui costs by either of output or charging 1.) Using the three-point curve drawing tool, draw and label a new AS curve that 1,200 V as wel 800 Vtheir level 400 V prices for the same level of output 5,0007,000 2,000 4,000 6,000 Real GDP (Y) 8,000 10,000 illustrates the return to long-run equilibrium in Ashenvale 2.) Using the point drawing tool, plot and label the new equilibrium point Carefully follow the instructions above, and only draw the required object. As the economy moves into long-run equilibrium, the equilibrium price level will V and the equilibrium level of output will VThe output gap will be completely eliminated as the economy reaches its natural rate of unemployment

Answer 1

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