The following graph represents the aggregate supply (AS) curve based on an expected price level of 120. The economy's potential GDP level is $9trillion.Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expectedprice level of 120, but the actual price level turns out to be 80.Show the short-run effect of the unexpectedly low price level by dragging the curve or moving the point to the appropriate position.Note: To move the curve, select and drag any part of the curve except the point. To move the point, select and drag the point along the curve. If youwant to move both, first move the curve, and then move the point. The curve and point will snap into position, so if you try to move one of them andit snaps back to its original position, just try again and drag it a little farther.PRICE LEVEL2402001608120PRICE LEVEL804002402000Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph:160The lower-than-expected price level causes firms to earn less profit than they expected on each unit of output they produce, and, therefore, theydecrease their production level. At the same time, the real value of wages and other resource prices is higher than workers and firmsexpected when they signed long-term contracts. As a result, the economy as a whole produces at a level below its potential GDP, andunemployment is higher than its natural rate.1203Now, suppose prices remain lower than expected. As a result, in the next round of labor negotiations, unions accept lower wages for their members.The following graph shows the potential GDP for this economy as well as the same initial aggregate supply curve as in the first graph.80Show the long-run effect of the labor negotiations by dragging the either the aggregate supply (AS) curve or the potential GDP (PGDP) curve to theappropriate position.40Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps backto its original position, just drag it a little farther.0AS[120]6912REAL GDP (Trillions of dollars)0153PGDP, PGDP₂186912REAL GDP (Trillions of dollars)AS[120]AS₁AS,15?18Potential GDP0AS?

Aggregate supply refers to the total amount of goods and services that all industries in an economy…

The following graph represents the aggregate supply (AS) curve based on an expected price level of 120. The economy's potential GDP level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 80. Show the short-run effect of the unexpectedly low price level by dragging the curve or moving the point to the appropriate position. Note: To move the curve, select and drag any part of the curve except the point. To move the point, select and drag the point along the curve. If you want to move both, first move the curve, and then move the point. The curve and point will snap into position, so if you try to move one of them and it snaps back to its original position, just try again and drag it a little farther.

The following graph represents the aggregate supply (AS) curve based on an expected price level of 120. The economy's potential GDP level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 80. Show the short-run effect of the unexpectedly low price level by dragging the curve or moving the point to the appropriate position. Note: To move the curve, select and drag any part of the curve except the point. To move the point, select and drag the point along the curve. If you want to move both, first move the curve, and then move the point. The curve and point will snap into position, so if you try to move one of them and it snaps back to its original position, just try again and drag it a little farther.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Which of the below is one of the reasons that the Aggregate Demand curve is downward sloping? The income effect of a price change, aggregated across many markets The substitution effect of a price change, aggregated across many markets Higher inflation means nominal incomes are higher so households can afford to spend more Higher domestic price levels cause exports to fall and imports to rise
Following an increase in consumer confidence, the US economy is experiencing a significant increase in aggregate spending. Using a correctly labeled aggregate demand and aggregate supply diagram, show how the change in aggregate spending will affect each of the following in the short run -Output -The price level
Which of the following would be most likely to produce a leftward shift of the aggregate demand (AD) curve? a) an increase in exports b) an increase in energy costs c) a decrease in imports d) a decrease in government expenditure
The following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 120. The economy's full- employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 160. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. PRICE LEVEL (CPI) 240 200 160 40 0 0 3 SRAS[120] 6 9 12 REAL GDP (Trillions of dollars) 15 18 SRAS[120] 0 (?) Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph:
type plz
The figure to the right shows the determination of the economy's short run equilibrium price level and aggregate output (income). Draw a single line or curve (either AD or AS) such that a new equilibrium occurs with a lower price level and a higher output (income). NOTE: Shifts in AD require the line drawing tool while the three-point curved line drawing tool is used to shift AS. Properly label your new line or curve. Note: Carefully follow the instructions above, and only draw the required object. Which of the following events could have caused this particular change? A. A sharp increase in immigration. B. An increase in bad weather and natural disasters. OC. A reduction in the country's labor force participation rate. OD. An increase in entrepreneurial-stifling taxes and regulations. Price level, P Aggregate output (income), Y ASO ADO O
The U.S. economy is initially in short-run macro-equilibrium. Assume oil prices fall. As a result, we observe the following in our economy Question 2 options: a) Both the price level and real GDP decrease b) The price level falls and real GDP increases c) The price level increases and real GDP falls d) Both the price level and real GDP increase.
The following graph shows an economy's short-run aggregate supply curve (SRAS), current equilibrium aggregate price level (P₁), and real GDP ( 21). The economy currently has Natural Real GDP (QN) of $6 trillion. Use this information to place the orange long-run aggregate supply curve (LRAS, square symbols) in the correct position on the graph. PRICE LEVEL 10 8 1 A 2 0 0 2 A₁ 4 6 Q₁ REAL GDP (Trillions of dollars) 8 SRAS 10 The equilibrium A₁, shown on the graph, reveals that real GDP (2₁) is shifting SRAS O LRAS Natural Real GDP. As a result, wages will over time,
The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (AS), and the long-run aggregate supply curve ( LRAS) for a hypothetical economy. Initially, the expected price level equals the actual price level, and the economy experiences long-run equilibrium at a natural level of output of $100 billion.. Suppose a bout of severe weather drives up agricultural costs, increases the costs of transporting goods and services, and increases the costs of producing goods and services. Use the graph to help you answer the questions about the short-run and long-run effects of the increase in production costs that follow. (Note: You will not be graded on any adjustments made to the graph.) Hint: For simplicity, ignore any possible impact of the severe weather on the natural level of output.
Use appropriate graph(s) to explain the effect of each of the following events, if any, on the position of the short- and long-run aggregate supply curves and the aggregate demand curve for a small open economy. a) The country becomes home to thousands of immigrants who significantly increase its labour force. b) The Central Organization of Trade Unions in the country wins a 10 percent increase in money wage rates for low-income workers. c) There is a decrease in the income of the country's major trading partners. d) The country starts to harness geothermal energy, which it puts to use and sells the excess energy to neighbouring states.
Suppose the full-employment level of real output (Q for a hypothetical economy is $250 and the price level (P) initially is 100. Use the short-run aggregate supply schedules below to answer the questions that follow. AS (P - 100) AS (P - 125) AS (P - 75) P Q P P 125 $ 280 125 $ 250 125 $ 310 100 250 100 220 100 280 75 220 75 190 75 250 Instructions: Enter your answers as a whole number. a. What is the level of real output in the short run if the price level unexpectedly rises from 100 to 125 because of an increase in aggregate demand? What happens if the price level unexpectedly falls from 100 to 75 because of a decrease in aggregate demand? b. What is the level of real output in the long run when the price level rises from 100 to 125? When the price level falls from 100 to 75?
Suppose firms become very pessimistic about future business conditions and significantly reduce investment spending. Show the short-run effect of this pessimism on the aggregate-demand curve. Price Level LRAS Aggregate Supply * Aggregate Demand Quantity of Output Aggregate Demand Aggregate Supply LRAS