Real business cycle theorists maintain that macroeconomic fluctuations arise principally from supply-side changes in technology and resource availability. The following graph shows the long-run aggregate supply curve for a hypothetical economy where the initial full-employment output level is $12.5 trillion. It also shows an initial aggregate demand curve (AD1) and two possible shifts in aggregate demand, either to the right (AD2) or to the left ( AD3). Initially, the economy is operating at its full-employment output level ($12.5 trillion) and a price level of 145. Then, major technological innovations cause the economy's full-employment output level to increase by $500 billion ($0.5 trillion). Use the green line (triangle symbols) to show the long-run aggregate supply curve (LRAS2) after the major production innovations. PRICE LEVEL 195 185 175 165 155 145 135 125 115 105 95 LRAS AD AD AD 2 10.0 10.5 11.0 11.5 12.0 12.5 13.0 13.5 14.0 14.5 15.0 REAL GDP (Trillions of dollars) LRAS + New Equilibrium
Real business cycle theorists maintain that macroeconomic fluctuations arise principally from supply-side changes in technology and resource availability. The following graph shows the long-run aggregate supply curve for a hypothetical economy where the initial full-employment output level is $12.5 trillion. It also shows an initial aggregate demand curve (AD1) and two possible shifts in aggregate demand, either to the right (AD2) or to the left ( AD3). Initially, the economy is operating at its full-employment output level ($12.5 trillion) and a price level of 145. Then, major technological innovations cause the economy's full-employment output level to increase by $500 billion ($0.5 trillion). Use the green line (triangle symbols) to show the long-run aggregate supply curve (LRAS2) after the major production innovations. PRICE LEVEL 195 185 175 165 155 145 135 125 115 105 95 LRAS AD AD AD 2 10.0 10.5 11.0 11.5 12.0 12.5 13.0 13.5 14.0 14.5 15.0 REAL GDP (Trillions of dollars) LRAS + New Equilibrium
Chapter10: Aggregate Demand And Supply
Section: Chapter Questions
Problem 8SQP
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Not sure what to do for the graph and what's correct
![Real business cycle theorists maintain that macroeconomic fluctuations arise principally from
supply-side changes in technology and resource availability.
The following graph shows the long-run aggregate supply curve for a hypothetical economy where
the initial full-employment output level is $12.5 trillion. It also shows an initial aggregate demand
curve (AD1) and two possible shifts in aggregate demand, either to the right (AD2) or to the left (
AD3).
Initially, the economy is operating at its full-employment output level ($12.5 trillion) and a price
level of 145. Then, major technological innovations cause the economy's full-employment output
level to increase by $500 billion ($0.5 trillion).
Use the green line (triangle symbols) to show the long-run aggregate supply curve (LRAS2) after
the major production innovations.
PRICE LEVEL
10.0
LRAS
115 120 125 130
REAL GDP (Trillions of dollars)
ADADAD
14.0
2
15.0
LRAS
2
New Equilibrium
According to real business cycle theorists,
production innovations incentivizes businesses to borrow
supply to
consumption resulting from the major
1
from banks, causing the money
. As a result, the aggregate demand curve shifts to the
Use the black horizontal drop line (plus symbol) to indicate the economy's new equilibrium output
and price level after the major production innovations and the corresponding change in aggregate
demand.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F789d3dfb-5c7b-49c8-8965-10f3e7f1c4e9%2Fd98e633a-3625-4a4b-9484-e2c42011b642%2F4og51g4_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Real business cycle theorists maintain that macroeconomic fluctuations arise principally from
supply-side changes in technology and resource availability.
The following graph shows the long-run aggregate supply curve for a hypothetical economy where
the initial full-employment output level is $12.5 trillion. It also shows an initial aggregate demand
curve (AD1) and two possible shifts in aggregate demand, either to the right (AD2) or to the left (
AD3).
Initially, the economy is operating at its full-employment output level ($12.5 trillion) and a price
level of 145. Then, major technological innovations cause the economy's full-employment output
level to increase by $500 billion ($0.5 trillion).
Use the green line (triangle symbols) to show the long-run aggregate supply curve (LRAS2) after
the major production innovations.
PRICE LEVEL
10.0
LRAS
115 120 125 130
REAL GDP (Trillions of dollars)
ADADAD
14.0
2
15.0
LRAS
2
New Equilibrium
According to real business cycle theorists,
production innovations incentivizes businesses to borrow
supply to
consumption resulting from the major
1
from banks, causing the money
. As a result, the aggregate demand curve shifts to the
Use the black horizontal drop line (plus symbol) to indicate the economy's new equilibrium output
and price level after the major production innovations and the corresponding change in aggregate
demand.
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