3-5 3. Assuming wages and resource prices are flexible, show how each economy below willself-adjust in the long run.Economy #1PriceLevelPL1LRASSRASAD1PriceLevelPL2Economy #2LRASY1 YFRGDPYF Y24. Assume instead that Economy #2 experiences economic growth. Whathappens to LRAS and output?SRASAD2RGDP5. Does the natural rate of unemployment increase, decrease, or stay the same when theLRAS shifts right?

Positive negative gap occurs when the current output is greater than the potential output, whereas…

3. Assuming wages and resource prices are flexible, show how each economy below will self-adjust in the long run. Economy #1 Price LRAS Level SRAS XV PL2 AD1 Level PL1 Economy #2 Price Y1 LRAS YF RGDP YF Y2 4. Assume instead that Economy #2 experiences economic growth. What happens to LRAS and output? SRAS AD2 RGDP 5. Does the natural rate of unemployment increase, decrease, or stay the same when the LRAS shifts right?

3. Assuming wages and resource prices are flexible, show how each economy below will self-adjust in the long run. Economy #1 Price LRAS Level SRAS XV PL2 AD1 Level PL1 Economy #2 Price Y1 LRAS YF RGDP YF Y2 4. Assume instead that Economy #2 experiences economic growth. What happens to LRAS and output? SRAS AD2 RGDP 5. Does the natural rate of unemployment increase, decrease, or stay the same when the LRAS shifts right?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

3-5

3. Assuming wages and resource prices are flexible, show how each economy below will
self-adjust in the long run.
Economy #1
Price
Level
PL1
LRAS
SRAS
AD1
Price
Level
PL2
Economy #2
LRAS
Y1 YF
RGDP
YF Y2
4. Assume instead that Economy #2 experiences economic growth. What
happens to LRAS and output?
SRAS
AD2
RGDP
5. Does the natural rate of unemployment increase, decrease, or stay the same when the
LRAS shifts right?

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