8. Problems and Applications Q8 As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising commodity prices. Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregate supply and aggregate demand on the following graph. Then on the subsequent graph, indicate what happens in a Phillips-curve diagram. Price Level LRAS Aggregate Supply Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply LRAS + Long-Run Equilibrium

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8. Problems and Applications Q8
As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a
decrease in short-run aggregate supply caused by rising commodity prices.
Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregate supply and aggregate demand on the following graph.
Then on the subsequent graph, indicate what happens in a Phillips-curve diagram.
Price Level
LRAS
Aggregate Supply
*
Aggregate Demand
Quantity of Output
Aggregate Demand
Aggregate Supply
LRAS
Long-Run Equilibrium
(?)
Transcribed Image Text:8. Problems and Applications Q8 As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising commodity prices. Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregate supply and aggregate demand on the following graph. Then on the subsequent graph, indicate what happens in a Phillips-curve diagram. Price Level LRAS Aggregate Supply * Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply LRAS Long-Run Equilibrium (?)
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