**Question:**Refer to the above diagram. Assume the economy is operating at point Z. If we choose to leave the economy to correct itself, which automatic mechanism would bring us back to long run equilibrium?**Options:**- ○ A decrease in aggregate demand- ○ An increase in short run aggregate supply- ○ A decrease in long run aggregate supply- ○ A decrease in short run aggregate supply- ○ An increase in aggregate demand ### Diagram ExplanationThe diagram illustrates the aggregate demand and supply model in an economy. It includes three aggregate demand curves (AD₀, AD₁, AD₂), one short-run aggregate supply curve (SRAS), and one long-run aggregate supply curve (LRAS).- **Vertical Axis (Price Level):** - Labeled from P₀ to P₄.- **Horizontal Axis (Real Domestic Output, GDP):** - Labeled from Q₀ to Q₃.- **Curves:** - **AD Curves:** These downward-sloping curves represent different levels of aggregate demand in the economy. AD₀ is the leftmost, followed by AD₁ and AD₂. - **SRAS Curve:** This upward-sloping curve represents the short-run aggregate supply. - **LRAS Curve:** This vertical line indicates the economy's potential output when all resources are fully employed.- **Points:** - **M, W, X, Y, Z, S, V:** These are intersection points on the graph representing different combinations of price levels and real output.### Scenario DescriptionRefer to the above diagram. Assume the economy is operating at point Z. If we choose to leave the economy to correct itself, which automatic mechanism would bring us back to long-run equilibrium?

With economy operating at below potential output(LRAS) at point Z, if the economy will left for self…

Refer to the above diagram. Assume the economy is operating at point Z. If we choose to leave the economy to correct itself, which automatic mechanism would bring us back to long run equilibrium? A decrease in aggregate demand O An increase in short run aggregate supply O A decrease in long run aggregate supply

Refer to the above diagram. Assume the economy is operating at point Z. If we choose to leave the economy to correct itself, which automatic mechanism would bring us back to long run equilibrium? A decrease in aggregate demand O An increase in short run aggregate supply O A decrease in long run aggregate supply

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Arrange these statements in sequence to explain why the short run aggregate supply (SR AS) curve slopes upward. Suppositions as a starting point Conclusion as to why the SR AS curve slopes upward Answer Bank At the macroeconomic level, the increase in aggregate demand (AD) corresponds to a shift in the firms' demand curve, whereas the firms'supply curve remains fixed. Since customers are demanding more of the firms'product, the firms' demand curves increase, which increases prices and output. The firms'willingness to supply more output at a higher price at a micro level shows a positive relationship, which is then also reflected at the macro level with an upward sloping SR AS curve.
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Which of the following would cause the Aggregate Supply curve to move from AS to AS2 in the graph below? Price Level 150 140 130 120 110 100 90 80 70 60 0 5 10 15 Real GDP ($ billion) AS -AD-AS2 O A federal government increase in spending. O A general increase in energy and labor cost for businesses. O An increase in productivity. O A general decrease in labor cost for businesses. 20 25
Suppose that the coronavirus pandemic (COVID 19) in 2020 has resulted in a leftward shift of the aggregate demand curve (it has also shifted the short-run aggregate supply to the left, but let’s ignore this effect here for simplification). A. Use the aggregate-demand/aggregate-supply model to show the effects on output and the price level/inflation in both the short run and long run (assume that the short-run aggregate supply curve is upward sloping). B. Show the adjustment process of the economy from the short run to the long run. C. What is the effect on unemployment in short run and long run? D. Can policymakers use monetary policy (and/or fiscal policy) to accommodate this shock? Describe what happens to the economy in response to this policy action.
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Along the long-run aggregate supply curve, the level of Real GDP supplied with increases in the price level. O does not change O increases O decreases slightly O decreases dramatically
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Question 4 Refer to the information provided in Figure 12.1 below to answer the questions that follow. Not yet answered Marked out of 1.00 AD P Flag question AD AD Aggregate output (Y) Figure 12.1 Refer to Figure 12.1. Suppose the economy is at Point A. A can cause a movement to Point D. Select one: O a. decrease in the price level O b. increase in the price level increase in aggregate demand O d. decrease in aggregate demand Price level
Price level LRAS AS1 Figure 12.8 C B A ASO AS₂ AD₁ ADO E Y2 Yo Y₁ Aggregate output ($ billion) AD₂ Refer to Figure 12.8. This economy cannot continue to produce Y₁ (or at point B) because O the price of raw material will increase, shifting the aggregate demand curve to AD2. O all of the above O the price of raw material and wages will increase shifting the aggregate supply curve to AS₁. O the price of inputs will decrease, shifting the aggregate supply curve to AS2.
Question 29 Which of the following factors will not shift the long-run aggregate supply curve? O An increase in capital accumulation. An increase in available resources. An increase in the price level. An improvement in production technology.
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