Suppose that the economy is initially in long-run equilibrium with the price level of 800.Now suppose that the Aggregate Demand (AD) curve shifts left from AD1 (blue) to AD2 (green).Price Level1200+11001000ADX900-800AD700-SRASI600*500400300200100LRAS200 300 400 500 600 700 800 900Real GDPWhat is GDP in the new long-run equilibrium as a result of this shift?1001000 1100 120

The economy was initially performing at the price level of $800 and a real GDP of 200 units. It is…

Suppose that the economy is initially in long-run equilibrium with the price level of 800. Now suppose that the Aggregate Demand (AD) curve shifts left from AD1 (blue) to AD2 (green). 1200- 1100- 1000 Price Level ADX 900- 800* ADX 700 SRASI 600 500 400- 300- 200 100 LRAS 200 300 400 500 600 700 800 900 Real GDP What is GDP in the new long-run equilibrium as a result of this shift? 100 1000 1100 120 a

Suppose that the economy is initially in long-run equilibrium with the price level of 800. Now suppose that the Aggregate Demand (AD) curve shifts left from AD1 (blue) to AD2 (green). 1200- 1100- 1000 Price Level ADX 900- 800* ADX 700 SRASI 600 500 400- 300- 200 100 LRAS 200 300 400 500 600 700 800 900 Real GDP What is GDP in the new long-run equilibrium as a result of this shift? 100 1000 1100 120 a

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The graph below shows the AD-AS diagram for Spain. Suppose that the economy is initially in long-run equilibrium with the price level of 900. Now suppose that the Aggregate Demand (AD) curve shifts left from AD1 (blue) to AD2 (green). 1200 AD 1100 1000 Price Level ADS 900- 800 79R ST 600* 500 400 300 200- 100- LRAS 100 200 300 400 500 600 700 800 900 1000 1100 120 Real GDP Q 1. What is the new GDP in the short-run as a result of this shift? I 2. What is the new price level in the short-run as a result of this shift? 3. What is the price new long-run equilibrium as a result of this shift? 4. What is GDP in the new long-run equilibrium as a result of this shift? 5. What causes the economy to move from the short-run equilibrium to the new long-run equilibrium? O Decreased wages. O increased wages. O Increased prices. O Decreased prices.
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