antity of Output SuppliedQuantity of Output Supplied = = Natural Level of Output+α×(Price LevelActual−Price LevelExpected)Natural Level of Output+α×Price LevelActual−Price LevelExpected The Greek letter αα represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that α=$2 billionα=$2 billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural level of output by $2 billion. Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 100. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 90, 95, 100, 105, and 110.
antity of Output SuppliedQuantity of Output Supplied = = Natural Level of Output+α×(Price LevelActual−Price LevelExpected)Natural Level of Output+α×Price LevelActual−Price LevelExpected The Greek letter αα represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that α=$2 billionα=$2 billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural level of output by $2 billion. Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 100. On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 90, 95, 100, 105, and 110.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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| Quantity of Output SuppliedQuantity of Output Supplied | = = | Natural Level of Output+α×(Price LevelActual−Price LevelExpected)Natural Level of Output+α×Price LevelActual−Price LevelExpected |
The Greek letter αα represents a number that determines how much output responds to unexpected changes in the price level. In this case, assume that α=$2 billionα=$2 billion. That is, when the actual price level exceeds the expected price level by 1, the quantity of output supplied will exceed the natural level of output by $2 billion.
Suppose the natural level of output is $50 billion of real GDP and that people expect a price level of 100.
On the following graph, use the purple line (diamond symbol) to plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange line segments (square symbol) to plot the economy's short-run aggregate supply (AS) curve at each of the following price levels: 90, 95, 100, 105, and 110.
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