During the transition from the short run to the long run, price level expectations will (remain the same, adjust upward, adjust downward), and the (short-run aggregate supply, aggregate demand) curve will shift to the (right, left).   In the long run, as a result of the sharp increase in saving, the price level (remains the same, increases, decreases), the quantity of output (rises above, falls below, returns to) potential output, and the

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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During the transition from the short run to the long run, price level expectations will (remain the same, adjust upward, adjust downward), and the (short-run aggregate supply, aggregate demand) curve will shift to the (right, left).
 
In the long run, as a result of the sharp increase in saving, the price level (remains the same, increases, decreases), the quantity of output (rises above, falls below, returns to) potential output, and the unemployment rate (rises above, falls below, returns to) the natural rate of unemployment.
Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and potential output of $300 billion before the
decrease in consumption spending due to the increase in saving.
Now, show the long-run impact of the sharp increase in saving by shifting both the aggregate demand (AD) curve and the short-run aggregate
supply (SRAS) curve to the appropriate positions. (Note: Assume that the sharp increase in saving does not cause a change in the economy's
resources, technology, or productivity.)
240
SRAS
200
AD
180
SRAS
120
80
AD
40
100
200
300
400
500
600
REAL GDP (Billions of dollars)
During the transition from the short run to the long run, price level expectations will
and the
curve will shift to the
In the long run, as a result of the sharp increase in saving, the price level
the quantity of output
potential
output, and the unemployment rate
the natural rate of unemployment.
PRICE LEVEL
Transcribed Image Text:Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and potential output of $300 billion before the decrease in consumption spending due to the increase in saving. Now, show the long-run impact of the sharp increase in saving by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (SRAS) curve to the appropriate positions. (Note: Assume that the sharp increase in saving does not cause a change in the economy's resources, technology, or productivity.) 240 SRAS 200 AD 180 SRAS 120 80 AD 40 100 200 300 400 500 600 REAL GDP (Billions of dollars) During the transition from the short run to the long run, price level expectations will and the curve will shift to the In the long run, as a result of the sharp increase in saving, the price level the quantity of output potential output, and the unemployment rate the natural rate of unemployment. PRICE LEVEL
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