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6. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prosperity abroad. 240 Now show the long-run impact of the economic prosperity abroad by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions. AS 200 AD (? 160 AS 240 120 AS 80 200 AD AD 40 160 AS 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) 80 AD In the short run, the increase in foreign spending on domestic goods associated with expansion abroad causes the price level to output to unemployment rate to 40 ▼ the price level people expected and the quantity of the natural level of output. The economic prosperity abroad will cause the ▼ the natural rate of unemployment in the short run. 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in foreign spending on domestic goods associated with expansion abroad. In the long run, as a result of the economic prosperity abroad, the price level quantity of output the During the transition from the short run to the long run, price-level expectations will v the natural level of output, and the unemployment rate and the curve will shift to the the natural rate of unemployment. PRICE LEVEL PRICE LEVEL

6. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prosperity abroad. 240 Now show the long-run impact of the economic prosperity abroad by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions. AS 200 AD (? 160 AS 240 120 AS 80 200 AD AD 40 160 AS 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) 80 AD In the short run, the increase in foreign spending on domestic goods associated with expansion abroad causes the price level to output to unemployment rate to 40 ▼ the price level people expected and the quantity of the natural level of output. The economic prosperity abroad will cause the ▼ the natural rate of unemployment in the short run. 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in foreign spending on domestic goods associated with expansion abroad. In the long run, as a result of the economic prosperity abroad, the price level quantity of output the During the transition from the short run to the long run, price-level expectations will v the natural level of output, and the unemployment rate and the curve will shift to the the natural rate of unemployment. PRICE LEVEL PRICE LEVEL

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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6. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prosperity abroad. 240 Now show the long-run impact of the economic prosperity abroad by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions. AS 200 AD (? 160 AS 240 120 AS 80 200 AD AD 40 160 AS 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) 80 AD In the short run, the increase in foreign spending on domestic goods associated with expansion abroad causes the price level to output to unemployment rate to 40 ▼ the price level people expected and the quantity of the natural level of output. The economic prosperity abroad will cause the ▼ the natural rate of unemployment in the short run. 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in foreign spending on domestic goods associated with expansion abroad. In the long run, as a result of the economic prosperity abroad, the price level quantity of output the During the transition from the short run to the long run, price-level expectations will v the natural level of output, and the unemployment rate and the curve will shift to the the natural rate of unemployment. PRICE LEVEL PRICE LEVEL
Transcribed Image Text:6. Economic fluctuations I The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prosperity abroad. 240 Now show the long-run impact of the economic prosperity abroad by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions. AS 200 AD (? 160 AS 240 120 AS 80 200 AD AD 40 160 AS 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) 80 AD In the short run, the increase in foreign spending on domestic goods associated with expansion abroad causes the price level to output to unemployment rate to 40 ▼ the price level people expected and the quantity of the natural level of output. The economic prosperity abroad will cause the ▼ the natural rate of unemployment in the short run. 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in foreign spending on domestic goods associated with expansion abroad. In the long run, as a result of the economic prosperity abroad, the price level quantity of output the During the transition from the short run to the long run, price-level expectations will v the natural level of output, and the unemployment rate and the curve will shift to the the natural rate of unemployment. PRICE LEVEL PRICE LEVEL
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