Not sure what to do for the graph and what's correct **Macroeconomic Fluctuations and Long-Run Aggregate Supply: An Educational Overview**Real business cycle theorists maintain that macroeconomic fluctuations arise principally from supply-side changes in technology and resource availability.The graph represents the long-run aggregate supply (LRAS) curve for a hypothetical economy. Initially, the full-employment output level is $12.5 trillion, with a price level of 145. The graph also illustrates an initial aggregate demand curve (AD1) with possible shifts to the right (AD2) or left (AD3).**Graph Explanation:**- The vertical orange line represents the initial long-run aggregate supply (LRAS1) at $12.5 trillion. - Blue lines represent different aggregate demand curves (AD1, AD2, AD3).- The green line (triangle symbols) shows the new long-run aggregate supply curve (LRAS2) after significant technological innovations, leading to an increase in full-employment output level by $500 billion (to $13.0 trillion).- The black horizontal line (plus symbol) marks the new equilibrium point after the shifts in supply and demand.**Filling in the Blanks:**- According to real business cycle theorists, **increased** consumption resulting from the major production innovations incentivizes businesses to borrow **more** from banks, causing the money supply to **expand**. As a result, the aggregate demand curve shifts to the **right**.Use the black horizontal drop line to indicate the economy’s new equilibrium output and price level after these innovations and corresponding changes in aggregate demand.

The output of an economy at full employment is the amount of production (Real GDP) at which all…

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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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