From the following graph, identify the initial equilibrium, the short-run equilibrium, and the long-run equilibrium based on the scenarios below. Explain your answers and identify what happened to the price level and aggregate output. Scenario 4. The economy is initially in long-run equilibrium at point C, and energy prices decrease significantly. The government reacts by implementing a contractionary fiscal policy. JAS (Long run) AS, (Short run) |AS; (Short run) B AD AD2 Yo Y2 Aggregate output (income), Y Price kevel, P
From the following graph, identify the initial equilibrium, the short-run equilibrium, and the long-run equilibrium based on the scenarios below. Explain your answers and identify what happened to the price level and aggregate output. Scenario 4. The economy is initially in long-run equilibrium at point C, and energy prices decrease significantly. The government reacts by implementing a contractionary fiscal policy. JAS (Long run) AS, (Short run) |AS; (Short run) B AD AD2 Yo Y2 Aggregate output (income), Y Price kevel, P
Chapter22: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
Problem 12P
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Question
![From the following graph, identify the initial equilibrium, the short-run equilibrium,
and the long-run equilibrium based on the scenarios below. Explain your answers and identify what
happened to the price level and aggregate output.
Scenario 4. The economy is initially in long-run equilibrium at point C, and energy prices decrease
significantly. The government reacts by implementing a contractionary fiscal policy.
AS (Long run)
AS, (Short run)
JAS, (Short run)
Po
AD
AD2
Yo
Y2
Aggregate output (income), Y
Price evel, P](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2d55295c-b0cf-49ee-a1f3-b114b00db4ad%2F6f38eb1c-da55-457c-8412-0963d0489992%2Fdhblq9r_processed.png&w=3840&q=75)
Transcribed Image Text:From the following graph, identify the initial equilibrium, the short-run equilibrium,
and the long-run equilibrium based on the scenarios below. Explain your answers and identify what
happened to the price level and aggregate output.
Scenario 4. The economy is initially in long-run equilibrium at point C, and energy prices decrease
significantly. The government reacts by implementing a contractionary fiscal policy.
AS (Long run)
AS, (Short run)
JAS, (Short run)
Po
AD
AD2
Yo
Y2
Aggregate output (income), Y
Price evel, P
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