The economy of Winterspring is currently in an equilibrium depicted by point Eo on the graph. Now suppose that there is a demand shock in the economy and the AD curve shifts from AD to AD₁, as shown by the graph. Suppose that there is no monetary validation. Using the point drawing tool, show the short-run equilibrium that the economy will move into in this case. Label this point E₁. Carefully follow the instructions above, and only draw the required objects. Suppose that there is no monetary validation. 1.) Using the three-point curve drawing tool, show the new AS curve in the long-run. Label this curve AS₁. 2.) Using the point drawing tool, show the long-run equilibrium that the economy will move into in this case. Label this point E₂. Price Level (P) 2,400 2,200- 2,000 1,800- 1,600 1,400 1,200- 1,000+ 800- 600- 400- 200- Economy of Winterspring Y" 1.291 0+ 1,000 3,000 A Ш Eot + 5,000 AD ASO AD₁ £7.055 7,000 9,000 11,000 Real GDP (Y)

The economy of Winterspring is currently in an equilibrium depicted by point Eo on the graph. Now suppose that there is a demand shock in the economy and the AD curve shifts from AD to AD₁, as shown by the graph. Suppose that there is no monetary validation. Using the point drawing tool, show the short-run equilibrium that the economy will move into in this case. Label this point E₁. Carefully follow the instructions above, and only draw the required objects. Suppose that there is no monetary validation. 1.) Using the three-point curve drawing tool, show the new AS curve in the long-run. Label this curve AS₁. 2.) Using the point drawing tool, show the long-run equilibrium that the economy will move into in this case. Label this point E₂. Price Level (P) 2,400 2,200- 2,000 1,800- 1,600 1,400 1,200- 1,000+ 800- 600- 400- 200- Economy of Winterspring Y" 1.291 0+ 1,000 3,000 A Ш Eot + 5,000 AD ASO AD₁ £7.055 7,000 9,000 11,000 Real GDP (Y)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

CS 18

Subject - Economics

The economy of Winterspring is currently in an equilibrium
depicted by point E on the graph.
Now suppose that there is a demand shock in the economy
and the AD curve shifts from AD to AD₁, as shown by the
graph.
Suppose that there is no monetary validation.
Using the point drawing tool, show the short-run equilibrium
that the economy will move into in this case. Label this point
E₁.
Carefully follow the instructions above, and only draw the
required objects.
Suppose that there is no monetary validation.
1.) Using the three-point curve drawing tool, show the new
AS curve in the long-run. Label this curve AS₁.
2.) Using the point drawing tool, show the long-run
equilibrium that the economy will move into in this case.
Label this point E2.
Carefully follow the instructions above, and only draw the
required objects.
Price Level (P)
2,400-
2,200-
Economy of Winterspring
Y*
2,000-
1,800-
1,600-
1,400 1.291
1,200-
1,000-
800-
600-
400-
200-
A
ZEot
0+
1,000 3,000 5,000
+
ADO
£7,055
7,000
Real GDP (Y)
ASO
AD₁
9,000 11,000

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Step 1: AD-AS equilibrium:

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Step 2: SR equilibrium:

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Step 4: LR equilibrium:

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