Question

1. The Queensland economy is initially in long-run equilibrium. But the economy is hit by a price increase in imported fertilizers which are essential for the state's agricultural sector.

   		In the short run, the short-run aggregate supply curve shifts left. In the long run, the price level is lower than its original value, output returns to potential, and real wages increase.
   		In the short run, the short-run aggregate supply curve shifts right. In the long run, the price level returns to its original value, output returns to its potential, and real wages increase.
   		In the short run, the short-run aggregate supply curve shifts left. In the long run, the price level returns to its original value, output returns to potential, and real wages decrease.
   		In the short run, the short-run aggregate supply curve shifts left. In the long run, the price level is lower than its original value, output returns to its potential, and real wages do not change.
   		In the short run, the short-run aggregate supply curve shifts right. In the long run, the price level is lower than its original values, output returns to its potential, and real wages do not change.

Answer 1

Option 4

In short run because of increase in input prices, the SRAS shifts left, employment level decreases and after once wages adjusted output and real wages returns to normal level