Consider the data of country E. Suppose an event happened and the price level and real GDP changed as shown in the following table: Real GDP (USD) Price level Before the event 3.5 trillion 100 Short run after the event 3.1 trillion 190 Which of the following AD-AS graphs correctly shows what happened to SRAS, LRAS and AD in short run and then long run? Price level LRAS SRAS1 SR - LR SRAS2 A B C Price level LRAS1 ° Price level Price level SR LR B LRAS₂ B AD₁ AD₂ Real GDP (Y) SRAS SRAS AD x* y** Real GDP (Y) LRAS SRAS: LR SRAS1 C Y* A B LRAS SRAS2 AD₁ AD₂ SRAS SR AD Real GDP (Y) Long run after the event 3.5 trillion 80 The economy is in a recession because of the decrease in consumer confidence. In short run after the decrease consumer confidence, the government conducts an expansionary fiscal policy. Which of the following AD-AS graphs correctly shows how the policy brings the real GDP of the economy back to the level of full-employment output? Price level ° Price level ° Price level SR LRAS SR A SRAS₁ After the government policy - AD1 LRAS After the government policy SR LRAS A B AD> Real GDP (Y) AD₂ SRAS₁ AD3 AD Real GDP (Y) SRAS₁ After the SRAS2 government policy A B C ° Price level LRAS SR B ADz AD₁ Real GDP (Y) SRAS A After the government policy AD₂ AD Real GDP (Y)
Consider the data of country E. Suppose an event happened and the price level and real GDP changed as shown in the following table: Real GDP (USD) Price level Before the event 3.5 trillion 100 Short run after the event 3.1 trillion 190 Which of the following AD-AS graphs correctly shows what happened to SRAS, LRAS and AD in short run and then long run? Price level LRAS SRAS1 SR - LR SRAS2 A B C Price level LRAS1 ° Price level Price level SR LR B LRAS₂ B AD₁ AD₂ Real GDP (Y) SRAS SRAS AD x* y** Real GDP (Y) LRAS SRAS: LR SRAS1 C Y* A B LRAS SRAS2 AD₁ AD₂ SRAS SR AD Real GDP (Y) Long run after the event 3.5 trillion 80 The economy is in a recession because of the decrease in consumer confidence. In short run after the decrease consumer confidence, the government conducts an expansionary fiscal policy. Which of the following AD-AS graphs correctly shows how the policy brings the real GDP of the economy back to the level of full-employment output? Price level ° Price level ° Price level SR LRAS SR A SRAS₁ After the government policy - AD1 LRAS After the government policy SR LRAS A B AD> Real GDP (Y) AD₂ SRAS₁ AD3 AD Real GDP (Y) SRAS₁ After the SRAS2 government policy A B C ° Price level LRAS SR B ADz AD₁ Real GDP (Y) SRAS A After the government policy AD₂ AD Real GDP (Y)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider the data of country E. Suppose an event happened and the price level and real GDP changed as shown in the following table:
Real GDP (USD)
Price level
Before the event
3.5 trillion
100
Short run after the event
3.1 trillion
190
Which of the following AD-AS graphs correctly shows what happened to SRAS, LRAS and AD in short run and then long run?
Price
level
LRAS
SRAS1
SR
-
LR
SRAS2
A
B
C
Price
level
LRAS1
°
Price
level
Price
level
SR
LR
B
LRAS₂
B
AD₁
AD₂
Real GDP (Y)
SRAS
SRAS
AD
x*
y**
Real GDP (Y)
LRAS
SRAS:
LR
SRAS1
C
Y*
A
B
LRAS
SRAS2
AD₁
AD₂
SRAS
SR
AD
Real GDP (Y)
Long run after the event
3.5 trillion
80
Transcribed Image Text:The economy is in a recession because of the decrease in consumer confidence. In short run after the decrease consumer confidence, the government conducts an expansionary fiscal policy. Which of the following AD-AS graphs correctly shows how the policy brings the real GDP of the economy back to the level of full-employment output?
Price
level
°
Price
level
°
Price
level
SR
LRAS
SR
A
SRAS₁
After the
government policy
-
AD1
LRAS
After the
government policy
SR
LRAS
A
B
AD>
Real GDP (Y)
AD₂
SRAS₁
AD3
AD
Real GDP (Y)
SRAS₁
After the
SRAS2
government policy
A
B
C
°
Price
level
LRAS
SR
B
ADz
AD₁
Real GDP (Y)
SRAS
A
After the
government policy
AD₂
AD
Real GDP (Y)
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