Based on increasing gas prices in the United States (c) Using the same graph, how did the country return to long-run equilibrium? Explain which specific factor(s) shifted AD, SRAS, or both, and how they’re related to your event and country. Make sure you explain how price and quantity changed. **Chapter 20: Causes of Economic Fluctuations****Assumption:**- The economy begins in long-run equilibrium.**Long-run Equilibrium:**- Natural level of output = Q1- Expected price level = Actual price level = P1- Aggregate Demand (AD) and Short-Run Aggregate Supply (SRAS) fluctuations must return to the long-run equilibrium aggregate supply (LRAS)**Graph Explanation:**- The graph on the right depicts three key curves: Aggregate Demand (AD1), Short-Run Aggregate Supply (SRAS1), and Long-Run Aggregate Supply (LRAS).- The vertical LRAS line indicates the natural level of output (Q1), which is the potential output of the economy when resources are fully utilized.- The intersection of AD1 and SRAS1 at point (Q1, P1) demonstrates the expected and actual price level (P1), where the economy is in long-run equilibrium.- The diagram illustrates how fluctuations in AD and SRAS impact the economy's movement back to the long-run equilibrium point.

Aggregate demand is the total demand for goods and services in an economy. Aggregate supply is the…

Assumption: o Economy begins in long-run equilibrium Long-run equilibrium: o Natural level of output = Q1 o Expected price level - Actual price level = P1 AD and SRAS fluctuations must return to the long-run equilibrium aggregate supply (LRAS) Price level A

Assumption: o Economy begins in long-run equilibrium Long-run equilibrium: o Natural level of output = Q1 o Expected price level - Actual price level = P1 AD and SRAS fluctuations must return to the long-run equilibrium aggregate supply (LRAS) Price level A

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

Based on increasing gas prices in the United States

(c) Using the same graph, how did the country return to long-run equilibrium? Explain which specific factor(s) shifted AD, SRAS, or both, and how they’re related to your event and country. Make sure you explain how price and quantity changed.

**Chapter 20: Causes of Economic Fluctuations**

**Assumption:**
- The economy begins in long-run equilibrium.

**Long-run Equilibrium:**
- Natural level of output = Q1
- Expected price level = Actual price level = P1
- Aggregate Demand (AD) and Short-Run Aggregate Supply (SRAS) fluctuations must return to the long-run equilibrium aggregate supply (LRAS)

**Graph Explanation:**
- The graph on the right depicts three key curves: Aggregate Demand (AD1), Short-Run Aggregate Supply (SRAS1), and Long-Run Aggregate Supply (LRAS).
- The vertical LRAS line indicates the natural level of output (Q1), which is the potential output of the economy when resources are fully utilized.
- The intersection of AD1 and SRAS1 at point (Q1, P1) demonstrates the expected and actual price level (P1), where the economy is in long-run equilibrium.
- The diagram illustrates how fluctuations in AD and SRAS impact the economy's movement back to the long-run equilibrium point.

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