As the economy moves to the right in Exhibit 3 along the upward-sloping aggregate supply curve the: Group of answer choices unemployment rate rises. unemployment rate falls. inflation rate falls. none of the answers are correct.
As the economy moves to the right in Exhibit 3 along the upward-sloping aggregate supply curve the: Group of answer choices unemployment rate rises. unemployment rate falls. inflation rate falls. none of the answers are correct.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
As the economy moves to the right in Exhibit 3 along the upward-sloping
Group of answer choices
unemployment rate rises.
unemployment rate falls.
inflation rate falls.
none of the answers are correct.
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Transcribed Image Text:**Exhibit 2: Aggregate Supply and Demand Curves**
The graph in Exhibit 2 illustrates the interaction between aggregate supply (AS) and aggregate demand (AD) in the economy, using two different AS curves: \( AS_1 \) and \( AS_2 \).
**Axes:**
- The vertical axis represents the "Price Level" as measured by the Consumer Price Index (CPI).
- The horizontal axis represents "Real GDP" in billions of dollars per year.
**Curves:**
1. **Aggregate Demand Curve (AD):**
- Downward sloping (blue curve).
- Indicates the inverse relationship between the price level and the quantity of goods and services demanded.
2. **Aggregate Supply Curves:**
- \( AS_1 \) and \( AS_2 \) are upward sloping (red curves).
- These curves show different levels of aggregate supply at various price levels.
**Equilibrium Points:**
- \( E_1 \): The intersection of \( AD \) and \( AS_1 \).
- \( E_2 \): The intersection of \( AD \) and \( AS_2 \).
**Analysis:**
- The movement from point \( E_1 \) to \( E_2 \) suggests an increase in the aggregate supply, represented by the shift from \( AS_1 \) to \( AS_2 \).
- This shift reflects an economy's ability to produce more goods and services at the same price level, often due to factors like technological advancements or increases in resources.
The graph is a visual representation of how changes in aggregate supply and demand can impact the overall price level and economic output.
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