3. Assume an economy operates in long-run equilibrium. Using an AD-AS diagram, show the direction of the shift for the AD, SRAS, and/or LRAS for each of the following changes in conditions. Show the effect on the price level (P) and GDP (Y). Finally, show movement back to long run equilibrium. a. The price of crude oil rises significantly (temporary). b. Spending on national defense doubles. c. An improvement in technology raises labor productivity. d. The government passes a law doubling all manufacturing wages.
3. Assume an economy operates in long-run equilibrium. Using an AD-AS diagram, show the direction of the shift for the AD, SRAS, and/or LRAS for each of the following changes in conditions. Show the effect on the price level (P) and GDP (Y). Finally, show movement back to long run equilibrium. a. The price of crude oil rises significantly (temporary). b. Spending on national defense doubles. c. An improvement in technology raises labor productivity. d. The government passes a law doubling all manufacturing wages.
Chapter2: International Flow Of Funds
Section: Chapter Questions
Problem 5IEE
Related questions
Question
I need do fast typing clear urjent no chatgpt used i will give 5 upvotes pls full explain with diagram
Transcribed Image Text:3. Assume an economy operates in long-run equilibrium. Using an AD-AS diagram, show
the direction of the shift for the AD, SRAS, and/or LRAS for each of the following
changes in conditions. Show the effect on the price level (P) and GDP (Y). Finally, show
movement back to long run equilibrium.
a. The price of crude oil rises significantly (temporary).
b. Spending on national defense doubles.
c. An improvement in technology raises labor productivity.
d. The government passes a law doubling all manufacturing wages.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you