Answered: A. What happens to Aggregate Supply…

A. What happens to Aggregate Supply when: 1. There is a substantial increase in the cost of raw materials? 2. There is an increase in labor productivity?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

D. Intertemporal Substitution Theory
3 A positively sloped short run aggregate supply curve
The Short-Run Aggregate Supply (SRAS)
Price
Level
P*₂
2
P*
LRAS SRAS₂
SRAS,
AD
Real GDP
A. What happens to Aggregate Supply when:
1. There is a substantial increase in the cost of raw materials?
2. There is an increase in labor productivity?
P₂
P₁
T
T
Panel (a)
Expansionary Policy
LRAS
AD₁
Y₁
Yp
Real GDP per year
SRAS
AD₂
P₂
Panel (b)
Contractionary Policy
LRAS
1
Yp Y₁
Real GDP per year
SRAS
AD₂
AD₁

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Step 1: Short run aggregate supply curve

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