a) how does this model below relates to the Covid Crisis? More specifically, please use the following graph to explain why price continuously going up during the Covid crisis? b) What is the better solution to solve the crisis than increase money supply? How does this work? 1. When short-runPriceLong-runaggregatesupplyaggregate supplyfalls ...LevelAS2Short-runaggregatesupply, AS,3....P3causes the P,whichpolicymakers canaccommodate the shift2....price levelP1to riseby expanding aggregatedemand ..further . ..AD2Aggregate demand, AD,Natural levelQuantity of Output4. ... but keeps outputat its natural level.of output

Due to the COVID crisis the supply curve received a shock as AS1 shifts to AS2. The main reason…

Answered: a) how does this model below relates to…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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a) how does this model below relates to the Covid Crisis? More specifically, please use the following graph to explain why price continuously going up during the Covid crisis?

b) What is the better solution to solve the crisis than increase money supply? How does this work?

1. When short-run
Price
Long-run
aggregate
supply
aggregate supply
falls ...
Level
AS2
Short-run
aggregate
supply, AS,
3....
P3
causes the P,
which
policymakers can
accommodate the shift
2....
price level
P1
to rise
by expanding aggregate
demand ..
further . ..
AD2
Aggregate demand, AD,
Natural level
Quantity of Output
4. ... but keeps output
at its natural level.
of output

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