Question

Figure 4 nflation Rate Dynamic AS Dynamic AD Real GDP Growth

Answer 1

dus: In flexible as a lesult long wn, we would eppect As to be? (B) Vertical Reason: in long um, puices & wages um, puces & wages are fully any puce s independent of outpeuta Any change affect output as As would be vertical LRAS (vertical) fall in in AD will not all the Pricia P. ADI Po ADO 0 Real YE GDP shart wn real GDP dusun: 16 dynamic As decreases, then in the growth : lises I the inflation falls. Hence auswer is (0) Price ($) Dynamic AS Real GDP rises from Yo toy, Puice ( inflation falls from op to Dynamic AD op Real ЧЪР Auswer & 16 dynamic As increases then inflation flation (e) will fall and real GDP fall and real GDP growth will rise Prium ($) As' opo Po P Inflation falls from to op, Real GDP cises from Oyo to Oy, Dynamic AD O Real GDP Yo Y, dreswee : Beguanic aggregate supply will increase if Explanation : (0) All the above Gout regulations when relaxed will cause peod- their plants theuby raising output R&D subsidies will promote innovation and reduce the cost -uces to we excess eapacity of 88 production. This will increase output 16 FED buy hicea Toyo rates reduction on producers will reduce thell cost of production and increase their retained eaming which will get invested in production theuby raising diffect level Auswer i boods ou open market them AD & (P) and inflation increase Bond puchase will ince - use the money supply in will cause interest Real GDP cate to fall and investments to use. This will increase AD to intersect AD at a higher real GDP and puce level. • AS Pi Po 1 -AD, -ADO Yo Yo level of Scanned with CamScanner CS Scanned with CamScanner