The following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion. Assume the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase. Using the following exhibit, shift the short-run aggregate supply (SRAS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prosperity abroad. Note: You will not be graded on any changes you make to the graph. PRICE LEVEL 2 6 8 LRAS 10 AD SRAS 0 0 2 4 6 8 10 REAL GDP (Trillions of dollars) AD SRAS In the short run, the increase in foreign spending on domestic goods associated with expansion abroad shifts the curve to causing the price level to In the short run, the increase in foreign spending on domestic goods associated with expansion abroad shifts the the the price level people expected and the quantity of output to The economic prosperity abroad will cause the unemployment rate to curve to potential output. the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion before the increase in foreign spending on domestic goods associated with expansion abroad. Now, on the following exhibit, show the long-run impact of the economic prosperity abroad by shifting both the short-run aggregate demand (AD) curve and the short-run aggregate supply (SRAS) curve to the appropriate positions. Assume that the economic prosperity abroad does not cause a change in the economy's resources, technology, or productivity.) Note: You will not be graded on any changes you make to the graph. PRICE LEVEL LRAS 10 10 8 60 2 0 0 2 4 6 REAL GDP (Trillions of dollars) AD SRAS 8 10 AD SRAS ?
The following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion. Assume the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase. Using the following exhibit, shift the short-run aggregate supply (SRAS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prosperity abroad. Note: You will not be graded on any changes you make to the graph. PRICE LEVEL 2 6 8 LRAS 10 AD SRAS 0 0 2 4 6 8 10 REAL GDP (Trillions of dollars) AD SRAS In the short run, the increase in foreign spending on domestic goods associated with expansion abroad shifts the curve to causing the price level to In the short run, the increase in foreign spending on domestic goods associated with expansion abroad shifts the the the price level people expected and the quantity of output to The economic prosperity abroad will cause the unemployment rate to curve to potential output. the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion before the increase in foreign spending on domestic goods associated with expansion abroad. Now, on the following exhibit, show the long-run impact of the economic prosperity abroad by shifting both the short-run aggregate demand (AD) curve and the short-run aggregate supply (SRAS) curve to the appropriate positions. Assume that the economic prosperity abroad does not cause a change in the economy's resources, technology, or productivity.) Note: You will not be graded on any changes you make to the graph. PRICE LEVEL LRAS 10 10 8 60 2 0 0 2 4 6 REAL GDP (Trillions of dollars) AD SRAS 8 10 AD SRAS ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion. Assume the
economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase.
Using the following exhibit, shift the short-run aggregate supply (SRAS) curve or the aggregate demand (AD) curve to show the short-run impact of
the economic prosperity abroad.
Note: You will not be graded on any changes you make to the graph.
PRICE LEVEL
2
6
8
LRAS
10
AD
SRAS
0
0
2
4
6
8
10
REAL GDP (Trillions of dollars)
AD
SRAS
In the short run, the increase in foreign spending on domestic goods associated with expansion abroad shifts the
curve to
Transcribed Image Text:causing the price level to
In the short run, the increase in foreign spending on domestic goods associated with expansion abroad shifts the
the
the price level people expected and the quantity of output to
The economic prosperity abroad will cause the unemployment rate to
curve to
potential output.
the natural rate of unemployment in the short run.
Again, the following graph shows the economy in long-run equilibrium at the expected price level of 5 and potential output of $5 trillion before the
increase in foreign spending on domestic goods associated with expansion abroad. Now, on the following exhibit, show the long-run impact of the
economic prosperity abroad by shifting both the short-run aggregate demand (AD) curve and the short-run aggregate supply (SRAS) curve to the
appropriate positions. Assume that the economic prosperity abroad does not cause a change in the economy's resources, technology, or productivity.)
Note: You will not be graded on any changes you make to the graph.
PRICE LEVEL
LRAS
10
10
8
60
2
0
0
2
4
6
REAL GDP (Trillions of dollars)
AD
SRAS
8
10
AD
SRAS
?
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