4. Shifts of the aggregate supply curve Which of the following would shift the SRAS curve to the left (ignoring any potential effect on LRAS)? O There is a technological improvement that allows firms to reduce their costs of production permanently. O The interest rate decreases, spurring investment spending. O The world price of oil decreases rapidly without warning but is not expected to remain at the new low level permanently. However, in the short run, it is less costly for firms to produce goods and services. O There is an increase in government spending. O The government introduces a set of new regulations that make it more costly for firms to produce and sell goods and services. These regulations are expected to be permanent. The following graph shows the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve for an economy. Suppose the world price of oil increases rapidly without warning but is not expected to remain at the new high level permanently. However, in the short run, it is more costly for all firms to produce goods and services. Illustrate the short-run effect of this change, before any long-run adjustments have taken place, by shifting one or both of the supply curves ( SRAS and LRAS) on the following graph. If you do not believe there will be any long-term effects, leave the LRAS in its current position.
4. Shifts of the aggregate supply curve Which of the following would shift the SRAS curve to the left (ignoring any potential effect on LRAS)? O There is a technological improvement that allows firms to reduce their costs of production permanently. O The interest rate decreases, spurring investment spending. O The world price of oil decreases rapidly without warning but is not expected to remain at the new low level permanently. However, in the short run, it is less costly for firms to produce goods and services. O There is an increase in government spending. O The government introduces a set of new regulations that make it more costly for firms to produce and sell goods and services. These regulations are expected to be permanent. The following graph shows the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve for an economy. Suppose the world price of oil increases rapidly without warning but is not expected to remain at the new high level permanently. However, in the short run, it is more costly for all firms to produce goods and services. Illustrate the short-run effect of this change, before any long-run adjustments have taken place, by shifting one or both of the supply curves ( SRAS and LRAS) on the following graph. If you do not believe there will be any long-term effects, leave the LRAS in its current position.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Assume that aggregate
Transcribed Image Text:240
LRAS
SRAS
200
SRAS
160
LRAS
120
80
40
AD
12
18
24
REAL GDP (Trillions of dollars)
Assume that aggregate demand is unaffected by the oil price spike. After the economy has fully adjusted to the oil price spike, the long-run effect is
in aggregate output and
in the price level.
PRICE LEVEL
Transcribed Image Text:4. Shifts of the aggregate supply curve
Which of the following would shift the SRAS curve to the left (ignoring any potential effect on LRAS)?
There is a technological improvement that allows firms to reduce their costs of production permanently.
The interest rate decreases, spurring investment spending.
The world price of oil decreases rapidly without warning but is not expected to remain at the new low level permanently. However, in the
short run, it is less costly for firms to produce goods and services.
There is an increase in government spending.
The government introduces a set of new regulations that make it more costly for firms to produce and sell goods and services. These
regulations are expected to be permanent.
The following graph shows the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve for an economy. Suppose
run,
the world price of oil increases rapidly without warning but is not expected to remain at the new high level permanently. However, in the short
it
is more costly for all firms to produce goods and services.
Illustrate the short-run effect of this change, before any long-run adjustments have taken place, by shifting one or both of the supply curves (
SRAS and LRAS) on the following graph. If you do not believe there will be any long-term effects, leave the LRAS in its current position.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education