Macmillan Learning The graphs illustrate an initial equilibrium for the economy. Suppose that the Federal Reserve lowers interest rates. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and real GDP (or aggregate output) in the short run and in the long run. Short-run graph Real GDP Long-run graph LRAS LRAS SRAS SRAS Short-run equilibrium AD Real GDP Long-rup equilibrium AD In the short-run, the price level decreases and GDP In the long-run, the price level GDP decreases and increases decreases stays the same

Macmillan Learning The graphs illustrate an initial equilibrium for the economy. Suppose that the Federal Reserve lowers interest rates. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and real GDP (or aggregate output) in the short run and in the long run. Short-run graph Real GDP Long-run graph LRAS LRAS SRAS SRAS Short-run equilibrium AD Real GDP Long-rup equilibrium AD In the short-run, the price level decreases and GDP In the long-run, the price level GDP decreases and increases decreases stays the same

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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