The economy of Country X has an actual unemployment rate that is less than the natural unemployment rate.a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following:Current Price Level labeled PL1Current Real Output labelled Y1Full employment output labeled Yfb) Suppose that investment spending on plant and equipment increases. On your graph in part (a), show the effect of the increase in investment spending on the equilibrium price level and real output in the short run.

Given country X has less unemployment than the natural rate, it implies that the GDP would be more…

Answered: The economy of Country X has an actual…

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 economy of Country X has an actual unemployment rate that is less than the natural unemployment rate.

a) Draw a correctly labeled graph of the long-run aggregate supply, short-run aggregate supply, and aggregate demand curves, and show each of the following:

Current Price Level labeled PL1
Current Real Output labelled Y1
Full employment output labeled Yf

b) Suppose that investment spending on plant and equipment increases. On your graph in part (a), show the effect of the increase in investment spending on the equilibrium price level and real output in the short run.

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