PRICEL 120 115 110 SRAS 105 LRAS 100 + 0 1 2 3 4 5 6 7 8 REAL GDP (Trillions of dollars) Suppose there is a sudden decrease in government purchases that causes a shift in aggregate demand from AD₁ to AD2. As a classical economist from Fedoria, you explain that the shift in aggregate demand creates a recessionary gap You also explain that a will be affected in the short run. You note that such a gap leads to an unemployment rate that is greater than the natural unemployment rate. This means that wages are certain to fall▼ until Real GDP equals Natural Real GDP. Finally, you As wages change, the explain that in the long run, curve shifts to the will be affected. PRICE LEVEL 140 135 Changes in a Self-Regulating Economy 130 125 AD₂ AD1 120 115 110 SRAS 105 100 0 1 2 3 LRAS 5 16 7 B REAL GDP (Trillions of dollars)
PRICEL 120 115 110 SRAS 105 LRAS 100 + 0 1 2 3 4 5 6 7 8 REAL GDP (Trillions of dollars) Suppose there is a sudden decrease in government purchases that causes a shift in aggregate demand from AD₁ to AD2. As a classical economist from Fedoria, you explain that the shift in aggregate demand creates a recessionary gap You also explain that a will be affected in the short run. You note that such a gap leads to an unemployment rate that is greater than the natural unemployment rate. This means that wages are certain to fall▼ until Real GDP equals Natural Real GDP. Finally, you As wages change, the explain that in the long run, curve shifts to the will be affected. PRICE LEVEL 140 135 Changes in a Self-Regulating Economy 130 125 AD₂ AD1 120 115 110 SRAS 105 100 0 1 2 3 LRAS 5 16 7 B REAL GDP (Trillions of dollars)
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter19: The Macroeconomic Perspective
Section: Chapter Questions
Problem 13RQ: Would you usually expect GDP as measured by what is demanded to be greater than GDP measured by what...
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Transcribed Image Text:PRICEL
120
115
110
SRAS
105
LRAS
100
+
0
1
2
3
4
5
6
7
8
REAL GDP (Trillions of dollars)
Suppose there is a sudden decrease in government purchases that causes a shift in aggregate demand from AD₁ to AD2. As a classical economist
from Fedoria, you explain that the shift in aggregate demand creates a recessionary gap You also explain that
a
will be affected in the short run.
You note that such a gap leads to an unemployment rate that is greater than the natural unemployment rate. This means that wages are certain
to fall▼
until Real GDP equals Natural Real GDP. Finally, you
As wages change, the
explain that in the long run,
curve shifts to the
will be affected.
Transcribed Image Text:PRICE LEVEL
140
135
Changes in a Self-Regulating Economy
130
125
AD₂
AD1
120
115
110
SRAS
105
100
0
1
2
3
LRAS
5
16
7
B
REAL GDP (Trillions of dollars)
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