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 government spending on infrastructure.During the transition from the short run to the long run, price-level expectations willand thecurve will shift to theNow show the long-run impact of the increase in government spending by shifting both the aggregate demand (AD) curve and the short-runaggregate supply (AS) curve to the appropriate positions.240AS200AD160AS12080AD4020040060080010001200OUTPUT (Billions of dollars)In the long run, as a result of the increase in government spending, the price levelthe quantity of outputthe natural level of output, and the unemployment ratethe natural rate of unemployment.PRICE LEVEL 8. Economic fluctuations IThe 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 government increases spending on building and repairing highways, bridges, and ports.Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the increase in governmentspending.240AS200AD160AS12080AD4020040060080010001200OUTPUT (Billions of dollars)In the short run, the increase in government spending on infrastructure causes the price level tothe price level people expected andthe quantity of output tothe natural level of output. The increase in government spending will cause the unemployment rate tothe natural rate of unemployment in the short run.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 government spending on infrastructure.During the transition from the short run to the long run, price-level expectations willand thecurve will shift to thePRICE LEVEL

The economy is in long-run equilibrium initially at the price level of $120 and an output level of…

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 government spending on infrastructure. During the transition from the short run to the long run, price-level expectations will curve will shift to the and the Now show the long-run impact of the increase in government spending 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 increase in government spending, the price level the quantity of output the natural level of output, and the unemployment rate the natural rate of unemployment. PRICE LEVEL

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 government spending on infrastructure. During the transition from the short run to the long run, price-level expectations will curve will shift to the and the Now show the long-run impact of the increase in government spending 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 increase in government spending, the price level the quantity of output the natural level of output, and the unemployment rate the natural rate of unemployment. PRICE LEVEL

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 AD 40 200 400 600 800 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. 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 consumption spending associated with…
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