LRAS SRAS AD Real GDP Price level

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that because of globally adverse meteorological conditions, there are serious concerns of climbing prices in an extensive group of commodities. As a result, people now expect an acute increase in the level of input prices. The figure shows aggregate demand (AD), short‑run aggregate supply (SRAS), and long‑run aggregate supply (LRAS). Move one or more of these curves to describe the short‑run effect this would have in the economy and answer the two questions.

Adjust graph in picture. 

In the short run, price level
a. increases.
b. decreases.
c. The change is indeterminate.
 
In the short run, real GDP (or aggregate output)
a. The change is indeterminate.
b. decreases.
c. increases.
LRAS
SRAS
AD
Real GDP
Price level
Transcribed Image Text:LRAS SRAS AD Real GDP Price level
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