Identify which curve on the previous graph corresponds to each of the following descriptions. If the curve described is not shown on the graph, choose Not Shown. In the descriptions, AD represents aggregate demand; SRAS represents short-run aggregate supply; LRAS represents long-run aggregate supply. Description SRAS if the expected price level is 50 SRAS if the expected price level is 70 SRAS if the expected price level is 60 LRAS AD a O O O O b O O с O d O O O O Not Shown O O O O O Suppose the economy is currently in short-run equilibrium at point L. In this case, the economy is producing at an output level potential output. At current prices and wage levels, real wages are what firms and workers expected when they agreed on wage contracts. In the long run, if the price level and the nominal wage are both flexible, wages will, which will cause the Assuming the other two curves do not change, the economy will reach a new equilibrium at an output of curve to shift to the and a price level of its

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10. Short-run equilibrium and long-run aggregate supply
The following graph shows several aggregate demand and aggregate supply curves for an economy whose potential output is $5 trillion. The curves
are labeled a, b, c, and d. Three points on the graph are also indicated by grey stars and labeled K, L, and M.
PRICE LEVEL (CPI)
100
90
80
70
60
50
40
30
20
0
с
1
d
M
a
2
3
4
5
REAL GDP (Trillions of dollars)
6
b
7
8
Transcribed Image Text:10. Short-run equilibrium and long-run aggregate supply The following graph shows several aggregate demand and aggregate supply curves for an economy whose potential output is $5 trillion. The curves are labeled a, b, c, and d. Three points on the graph are also indicated by grey stars and labeled K, L, and M. PRICE LEVEL (CPI) 100 90 80 70 60 50 40 30 20 0 с 1 d M a 2 3 4 5 REAL GDP (Trillions of dollars) 6 b 7 8
Identify which curve on the previous graph corresponds to each of the following descriptions. If the curve described is not shown on the graph, choose
Not Shown. In the descriptions, AD represents aggregate demand; SRAS represents short-run aggregate supply; LRAS represents long-run aggregate
supply.
Description
SRAS if the expected price level is 50
SRAS if the expected price level is 70
SRAS if the expected price level is 60
LRAS
AD
a
O
O
O
b
O
O
O
O
O
с
O
O
O
O
O
d
O
с
O
O
Not Shown
O
O O
O
Suppose the economy is currently in short-run equilibrium at point L. In this case, the economy is producing at an output level
potential output. At current prices and wage levels, real wages are
what firms and workers expected when they agreed on wage
curve to shift to the
contracts. In the long run, if the price level and the nominal wage are both flexible, wages will, which will cause the
. Assuming the other two curves do not change, the economy will reach a new equilibrium at an output of
and a price level of
its
Transcribed Image Text:Identify which curve on the previous graph corresponds to each of the following descriptions. If the curve described is not shown on the graph, choose Not Shown. In the descriptions, AD represents aggregate demand; SRAS represents short-run aggregate supply; LRAS represents long-run aggregate supply. Description SRAS if the expected price level is 50 SRAS if the expected price level is 70 SRAS if the expected price level is 60 LRAS AD a O O O b O O O O O с O O O O O d O с O O Not Shown O O O O Suppose the economy is currently in short-run equilibrium at point L. In this case, the economy is producing at an output level potential output. At current prices and wage levels, real wages are what firms and workers expected when they agreed on wage curve to shift to the contracts. In the long run, if the price level and the nominal wage are both flexible, wages will, which will cause the . Assuming the other two curves do not change, the economy will reach a new equilibrium at an output of and a price level of its
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