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8. 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 a stock market boom increases household wealth and causes consumers to spend more. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. 240 AS 200 AD 160 AS 120 80 AD1 40 AD2 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to v the price level people expected and the quantity of output to v the natural level of output. The stock market boom will cause the unemployment rate to v the natural rate of unemployment in the short run. PRICE LEVEL

8. 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 a stock market boom increases household wealth and causes consumers to spend more. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. 240 AS 200 AD 160 AS 120 80 AD1 40 AD2 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to v the price level people expected and the quantity of output to v the natural level of output. The stock market boom will cause the unemployment rate to v the natural rate of unemployment in the short run. PRICE LEVEL

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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During the transition from the short run to the long run, price-level expectations will adjust downward and the short-run aggregate supply curve will shift to the right Now show the long-run impact of the stock market boom by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the long run, as a result of the stock market boom, the price level the quantity of output the natural level of output, and the unemployment rate the natural rate of unemployment. PRICE LEVEL
Transcribed Image Text:During the transition from the short run to the long run, price-level expectations will adjust downward and the short-run aggregate supply curve will shift to the right Now show the long-run impact of the stock market boom by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the long run, as a result of the stock market boom, the price level the quantity of output the natural level of output, and the unemployment rate the natural rate of unemployment. PRICE LEVEL
8. 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 a stock market boom increases household wealth and causes consumers to spend more. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. 240 AS 200 AD 160 AS 120 80 AD1 40 AD2 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to the price level people expected and the quantity of output to the natural level of output. The stock market boom will cause the unemployment rate to the natural rate of unemployment in the short run. PRICE LEVEL
Transcribed Image Text:8. 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 a stock market boom increases household wealth and causes consumers to spend more. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. 240 AS 200 AD 160 AS 120 80 AD1 40 AD2 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to the price level people expected and the quantity of output to the natural level of output. The stock market boom will cause the unemployment rate to the natural rate of unemployment in the short run. PRICE LEVEL
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