Ruritania's economy is depicted below, with the long run aggregate supply curve (LRAS), three short run aggregate supply curves (AS1, AS2, and AS3) and three aggregate demand curves (AD1, AD2, and AD3). Right now, Ruritania is at point A, with real GDP of 7 trillion krone and a price level of 100. Answer the questions based on the information in the graph. A shift to which curve would result in a short run equilibrium of 5 trillion krone and a lower price level? AS1 AD1 AS3 AD3 Price level 200 180 160 140 120 100 80 60 40 20 0 1 2 3 4 5 LRAS 6 7 A AS3 AS2 AD2 ASI AD3 AD1 8 9 10 11 12 13 14 Real GDP (trillion krone)

Ruritania's economy is depicted below, with the long run aggregate supply curve (LRAS), three short run aggregate supply curves (AS1, AS2, and AS3) and three aggregate demand curves (AD1, AD2, and AD3). Right now, Ruritania is at point A, with real GDP of 7 trillion krone and a price level of 100. Answer the questions based on the information in the graph. A shift to which curve would result in a short run equilibrium of 5 trillion krone and a lower price level? AS1 AD1 AS3 AD3 Price level 200 180 160 140 120 100 80 60 40 20 0 1 2 3 4 5 LRAS 6 7 A AS3 AS2 AD2 ASI AD3 AD1 8 9 10 11 12 13 14 Real GDP (trillion krone)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Between 2007 and 2009, the United States experienced a severe financial crisis and economic downturn commonly known as the Great Recession. Starting in 2006, housing values fell 30%, causing losses in mortgage-backed securities for families and financial institutions. The recession was marked by a drop in aggregate demand that caused a decline in GDP and an increase in unemployment. Attached is an example of an aggregate demand and aggregate supply (AD/AS) model that illustrates the general trends of the U.S. economy during the Great Recession. How did the AD/AS equilibrium change over time? Support your claims by referring to your AD/AS model. Select an economic factor (GDP, unemployment, price level) and explain what impact any shifts in AD or AS (or both) had on your chosen factor. Please tailor the answer according the AD/AS model in layman's terms
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