The following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion. Assume a boom increases household wealth and causes consumers to spend more. Using the following exhibit, shift the short-run aggregate supply (SRAS) curve or the aggregate demand (AD) curve to show the short-run impact of the boom. In the short run, the increase in consumption spending associated with the expansion shifts the curve to the , causing the price level to the price level people expected and the quantity of output to potential output. The boom will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion before the increase in consumption spending associated with the expansion. Now, on the following exhibit, show the long-run impact of the boom by shifting both the short-run aggregate demand (AD) curve and the short-run aggregate supply (SRAS) curve to the appropriate positions. Assume that the boom does not cause a change in the economy's resources, technology, or productivity.) Note: You will not be graded on any changes you make to the graph. During the transition from the short run to the long run, price level expectations will , and the curve will shift to the . In the long run, as a result of the boom, the price level , the quantity of output potential output, and the unemployment rate the natural rate of unemployment

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter20: Aggregate Demand And Supply

Section: Chapter Questions

Problem 3SQP

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The following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion. Assume a boom increases household wealth and causes consumers to spend more. Using the following exhibit, shift the short-run aggregate supply (SRAS) curve or the aggregate demand (AD) curve to show the short-run impact of the boom.

In the short run, the increase in consumption spending associated with the expansion shifts the curve to the , causing the price level to the price level people expected and the quantity of output to potential output. The boom will cause the unemployment rate to the natural rate of unemployment in the short run.

Again, the following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion before the increase in consumption spending associated with the expansion. Now, on the following exhibit, show the long-run impact of the boom by shifting both the short-run aggregate demand (AD) curve and the short-run aggregate supply (SRAS) curve to the appropriate positions. Assume that the boom does not cause a change in the economy's resources, technology, or productivity.)

Note: You will not be graded on any changes you make to the graph.

During the transition from the short run to the long run, price level expectations will , and the curve will shift to the .

In the long run, as a result of the boom, the price level , the quantity of output potential output, and the unemployment rate the natural rate of unemployment

The following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion. Assume a boom
increases household wealth and causes consumers to spend more. Using the following exhibit, shift the short-run aggregate supply (SRAS) curve or
the aggregate demand (AD) curve to show the short-run impact of the boom.
Note: You will not be graded on any changes you make to the graph.
PRICE LEVEL
10
0
2
LRAS
6
4
REAL GDP (Trillions of dollars)
AD
8
SRAS
10
ܕܘ
AD
O
SRAS
In the short run, the increase in consumption spending associated with the expansion shifts the
the price level to
the price level people expected and the quantity of output to
the natural rate of unemployment in the short run.
the unemployment rate to
, causing
curve to the
potential output. The boom will cause
Again, the following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion before the
increase in consumption spending associated with the expansion. Now, on the following exhibit, show the long-run impact of the boom by shifting both
the short-run aggregate demand (AD) curve and the short-run aggregate supply (SRAS) curve to the appropriate positions. Assume that the boom
does not cause a change in the economy's resources, technology, or productivity.)

PRICE LEVEL
10
8
2
LRAS
4
REAL GDP (Trillions of dollars)
AD
In the long run, as a result of the boom, the price level
unemployment rate
SRAS
10
AD
During the transition from the short run to the long run, price level expectations will
curve will shift to the
the natural rate of unemployment.
SRAS
, the quantity of output
and the
potential output, and the

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