Draw a correctly labeled graph of the long-run aggregate supply and short-run aggregate supply curves.Show each of the following in your graph. Assume that the economy of your graph's country has an actual unemployment rate that is less than the natural unemployment rate.Help with the last two bullet points. • Current price level, labeled PL1• Current real output, labeled Y1Full-employment output, labeled YFSuppose that investment spending on plant and equipment increases. On your graph, show the effect of theincrease in investment spending on the equilibrium price level and real output in the short run.• Now assume a significant increase in the world price of oil, a major production input for the United States. Show onyour graph how the increase in the oil price affects short-run aggregate supply, the price level, and real output.

In long run , economy reaches full employment level where LRAS = AD But economy is in under full…

Answered: • Current price level, labeled PL1 •…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Draw a correctly labeled graph of the long-run aggregate supply and short-run aggregate supply curves.

Show each of the following in your graph. Assume that the economy of your graph's country has an actual unemployment rate that is less than the natural unemployment rate.

Help with the last two bullet points.

• Current price level, labeled PL1
• Current real output, labeled Y1
Full-employment output, labeled YF
Suppose that investment spending on plant and equipment increases. On your graph, show the effect of the
increase in investment spending on the equilibrium price level and real output in the short run.
• Now assume a significant increase in the world price of oil, a major production input for the United States. Show on
your graph how the increase in the oil price affects short-run aggregate supply, the price level, and real output.

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