Question

the first question option is (remain the same/fall/rise). the second question option (reducing/increasing). the third question option (rise above/fall below)

the option here is (rises above/falls below)

t Login or Register 6. Why the aggregate supply-curve slopes upward in the short run Apla Student G In the short run, the quantity of output that fims supply fronm from the expected price level. Several theories explain how this might happen can deviate from the natural rate of output if the actual price level in the economy deviates For example, the sticky-price theory a firms announce the prices for their products in advance, based on an expected goods through catalogues and face high costs, the firms that rely on catalogue sales choose not to adust their prices. Sales frem on catalogues wil respond increase in the price level causes the quantity of output supplied toY asserts thet the output prices of some goods and services adjust slowly to changes in the price level. Suppose 100 for the coming year. Many of the firms sell their costs of reprinting if they change prices. The actual price level turns out to be 110. Faced with high menu ,and firms that rey by- the quantity of output they supply. If enough firms face high costs of adjusting prices, the unexpected the natural rate of output in the short run Suppose the economy's short-run aggregate-supply AS) curve is given by the following equation letter a represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume The Greek l that α-S2 billion. That is, when the actual price level exceeds the expected price level by rate of output by $2 billion. Suppose the natural rate of output is $60 billion of real GDP and that people expect a price level of 110 1, the quantity of output supplied will exceed the natural On the following graph, use the purple line (dlamond symbol) to plot this economy's long-run apgregate-supply (LRAS) curve. Then use the erange ine segments (iquare symbor) to plot the economy's short-un aggregute- supply (AS) curve at each of the folowing price levels: 100, 105, 110, 115 and 120 80 o0 bo ra 17 My Home Aplia Student C Suppose the natural rate of output is $60 bilion of real GDP and that people expect a price level of 11d On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate-supply (LRAS) curve. Then use the arange segments (square symbo) to plot the economy's short-run aggregate-supply (AS) curve at each o and 120, of the folowing price levels: 100, 105, 110, 115 115 RAS 2030 00 100 OUTPUT (8ions of dollars) The short-run quantity of output supplied by firms will fall below the natural rate of output when the actual price level that people expected. the price level Grade it Now Save & Continue withoult saving 80 17

Answer 1

1. Sales from catalogue will rise as the buyer is getting the product at a cheaper price.

2. Firms will respond by increasing the Quantity that they supply because of Price stickiness where keeping up with same prices is more beneficial than reprinting catalogues with higher prices. Due to inflation, the product appears much more cheaper and thus selling it more will be beneficial.

3. As Actual prices are greater then Expected prices and the firms have high cost of changes, the Firm Output will rise above the natural rate of output (stimulated due to higher then expected demand owing to consumer friendly change in price levels)

4. When actual price falls below the expected price, customer finds the good pricier, thus if firms follow the price stickiness, the demand for their product will decline owing to decline in the Output production below the Natural rate of Output.