Exhibit 3-1 PL P SRAS LRAS AD Y Y* GDPR Refer to Exhibit 3-1. The economy is currently producing at level Y. If an economist believes the economy (itself) can move to Y*, then he believes that the OLRAS curve will shift leftward until it intersects the SRAS and AD curves at Y. OSRAS curve will shift rightward and intersect the AD curve. economy will likely stay "stuck" in short-run equilibrium. O AD curve will shift rightward and intersect the SRAS curve.
Exhibit 3-1 PL P SRAS LRAS AD Y Y* GDPR Refer to Exhibit 3-1. The economy is currently producing at level Y. If an economist believes the economy (itself) can move to Y*, then he believes that the OLRAS curve will shift leftward until it intersects the SRAS and AD curves at Y. OSRAS curve will shift rightward and intersect the AD curve. economy will likely stay "stuck" in short-run equilibrium. O AD curve will shift rightward and intersect the SRAS curve.
Chapter11: Managing Aggregate Demand: Fiscal Policy
Section: Chapter Questions
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Transcribed Image Text:Exhibit 3-1
PL
P
SRAS
LRAS
AD
Y
Y*
GDPR
Refer to Exhibit 3-1. The economy is currently producing at level Y. If an economist believes
the economy (itself) can move to Y*, then he believes that the
OLRAS curve will shift leftward until it intersects the SRAS and AD curves at Y.
OSRAS curve will shift rightward and intersect the AD curve.
economy will likely stay "stuck" in short-run equilibrium.
O AD curve will shift rightward and intersect the SRAS curve.
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