Suppose an economy is in long-run equilibrium. The centrabank reduces the money supply by 5 percent.Use your diagram to show what happens to output and theprice level as the economy moves from the initial to the newshort-run equilibrium.LRASAggregate Supply*Aggregate DemandQuantity of OutputAggregate DemandAggregate SupplyNow adjust the graph to show the new long-run equilibrium.What causes the economy to move from its short-runequilibrium to its long-run equilibrium?O Nominal wages, prices, and perceptions adjust upward to this new price level.The government increases spending to increase aggregate demand.The government increases taxes to curb aggregate demand.O Nominal wages, prices, and perceptions adjust downward to this new price level.Which of the following is true according to the sticky-wagetheory of aggregate supply as a result of the decrease in thmoney supply? Check all that apply.Nominal wages at the initial equilibrium are equal to nominal wages at the new short-run equilibrium.Nominal wages at the initial equilibrium are greater than nominal wages at the new long-run equilibrium.Real wages at the initial equilibrium are greater than real wages at the new short-run equilibrium.Real wages at the initial equilibrium are equal to real wages at the new long-run equilibrium.Judging by the impact of the money supply on nominal anreal wages, this analysis consistent with the propositionthat money has real effects in the short run but is neutral ithe long run.

The total demand for goods and services in the economy is represented by aggregate demand (AD).…

pose an economy is in long-run equilibrium. The centra k reduces the money supply by 5 percent. your diagram to show what happens to output and the e level as the economy moves from the initial to the new rt-run equilibrium. LRAS Aggregate Supply Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply v adjust the graph to show the new long-run equilibrium. at causes the economy to move from its short-run ilibrium to its long-run equilibrium? Nominal wages, prices, and perceptions adjust upward to this new price level.

pose an economy is in long-run equilibrium. The centra k reduces the money supply by 5 percent. your diagram to show what happens to output and the e level as the economy moves from the initial to the new rt-run equilibrium. LRAS Aggregate Supply Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply v adjust the graph to show the new long-run equilibrium. at causes the economy to move from its short-run ilibrium to its long-run equilibrium? Nominal wages, prices, and perceptions adjust upward to this new price level.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 12P

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