can i get these both solved with a graph please ### An Exogenous Increase in the Price of OilThe graph illustrates the impact of an exogenous increase in the price of oil on the economy, depicted using a standard aggregate supply and demand model.#### Graph Explanation:- **Axes**: - The horizontal axis represents Output (Y), measuring economic production. - The vertical axis represents the Price Level (P), indicating the average level of prices in the economy.- **Curves**: - **LRAS (Long-Run Aggregate Supply)**: This is a vertical line, indicating that in the long run, supply is not affected by changes in the price level. It remains constant at a given level of output (Y). - **SRAS (Short-Run Aggregate Supply)**: Represented by a horizontal line, it shows the price level at which producers are willing to supply the economy in the short run. - **AD (Aggregate Demand)**: A downward-sloping curve showing the inverse relationship between the price level and output demanded in the economy.- **Point E**: This is the equilibrium where the Aggregate Demand (AD) curve intersects the LRAS and SRAS curves, determining the initial price level and output.When the price of oil increases exogenously, it typically causes a leftward shift in the SRAS curve (not shown explicitly), leading to higher price levels and lower outputs, reflecting inflationary pressures and reduced economic growth in the short run. For each shock identified below, shift the AD curve, the SRAS curve, or both to show its effects on aggregate demand and/or aggregate supply. Then move point E to the new short-run equilibrium to indicate the new price level \( P \) and output \( Y \). Assume the economy starts out in long-run equilibrium.a. An exogenous decrease in the velocity of money.**Graph Explanation:**The graph is a standard AD-AS model depicting the relationship between the aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in an economy.- **Axes:** - The vertical axis represents the Price Level (P). - The horizontal axis represents the Output (Y).- **Curves:** - **LRAS (Long-Run Aggregate Supply):** A vertical green line indicating the economy's potential output. It does not change with price level, reflecting full employment output. - **AD (Aggregate Demand):** A downward sloping blue curve. This curve shows the relationship between the price level and the quantity of output demanded. - **SRAS (Short-Run Aggregate Supply):** A horizontal or upward-sloping maroon line reflecting the current level of output at different price levels.- **Points:** - **E:** The initial equilibrium point where AD, SRAS, and LRAS intersect, indicating the initial price level and output in long-run equilibrium. For the scenario of an exogenous decrease in the velocity of money:- **AD Curve Shift:** A decrease in the velocity of money would generally lead to a leftward shift of the AD curve, as less money circulates through the economy, reducing overall spending.- **New Equilibrium:** The new short-run equilibrium would be at a lower price level and potentially lower output, depending on how far AD shifts leftward.This graphical representation helps illustrate how changes in economic factors affect the economy's overall output and price level.

The total quantity of all goods (and services) that the economy demands at various price levels is…

Answered: b. An exogenous increase in the price…

b. An exogenous increase in the price of oil. Price Level (Y) 10 9 8 7 6 5 4 3 2 1 0 0 1 2 3 LRAS E 4 5 Output (Y) 6 7 8 9 AD 10 SRAS

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

can i get these both solved with a graph please

### An Exogenous Increase in the Price of Oil

The graph illustrates the impact of an exogenous increase in the price of oil on the economy, depicted using a standard aggregate supply and demand model.

#### Graph Explanation:

- **Axes**:
- The horizontal axis represents Output (Y), measuring economic production.
- The vertical axis represents the Price Level (P), indicating the average level of prices in the economy.

- **Curves**:
- **LRAS (Long-Run Aggregate Supply)**: This is a vertical line, indicating that in the long run, supply is not affected by changes in the price level. It remains constant at a given level of output (Y).
- **SRAS (Short-Run Aggregate Supply)**: Represented by a horizontal line, it shows the price level at which producers are willing to supply the economy in the short run.
- **AD (Aggregate Demand)**: A downward-sloping curve showing the inverse relationship between the price level and output demanded in the economy.

- **Point E**: This is the equilibrium where the Aggregate Demand (AD) curve intersects the LRAS and SRAS curves, determining the initial price level and output.

When the price of oil increases exogenously, it typically causes a leftward shift in the SRAS curve (not shown explicitly), leading to higher price levels and lower outputs, reflecting inflationary pressures and reduced economic growth in the short run.

For each shock identified below, shift the AD curve, the SRAS curve, or both to show its effects on aggregate demand and/or aggregate supply. Then move point E to the new short-run equilibrium to indicate the new price level \( P \) and output \( Y \). Assume the economy starts out in long-run equilibrium.

a. An exogenous decrease in the velocity of money.

**Graph Explanation:**

The graph is a standard AD-AS model depicting the relationship between the aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in an economy.

- **Axes:**
- The vertical axis represents the Price Level (P).
- The horizontal axis represents the Output (Y).

- **Curves:**
- **LRAS (Long-Run Aggregate Supply):** A vertical green line indicating the economy's potential output. It does not change with price level, reflecting full employment output.
- **AD (Aggregate Demand):** A downward sloping blue curve. This curve shows the relationship between the price level and the quantity of output demanded.
- **SRAS (Short-Run Aggregate Supply):** A horizontal or upward-sloping maroon line reflecting the current level of output at different price levels.

- **Points:**
- **E:** The initial equilibrium point where AD, SRAS, and LRAS intersect, indicating the initial price level and output in long-run equilibrium.

For the scenario of an exogenous decrease in the velocity of money:

- **AD Curve Shift:** A decrease in the velocity of money would generally lead to a leftward shift of the AD curve, as less money circulates through the economy, reducing overall spending.
- **New Equilibrium:** The new short-run equilibrium would be at a lower price level and potentially lower output, depending on how far AD shifts leftward.

This graphical representation helps illustrate how changes in economic factors affect the economy's overall output and price level.

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