The graph below shows an economy operating at equilibrium in both the short run and long run at its full-employment level of our a. Show what happens when this economy moves from its full-employment equilibrium into a period of stagflation Use the graph to draw either a new AD curve or new AS curve to demonstrate stagfiation in this economy Instructions: Use the tool provided "New Curve to plot the appropriate line. After placing the curve, click on "Select and choose whether to label the curve "AD" or "AS" from the dropdown menu. Aggregate Demand and Aggregate Supply Price Level LRAS Tools New Curve O

The graph below shows an economy operating at equilibrium in both the short run and long run at its full-employment level of our a. Show what happens when this economy moves from its full-employment equilibrium into a period of stagflation Use the graph to draw either a new AD curve or new AS curve to demonstrate stagfiation in this economy Instructions: Use the tool provided "New Curve to plot the appropriate line. After placing the curve, click on "Select and choose whether to label the curve "AD" or "AS" from the dropdown menu. Aggregate Demand and Aggregate Supply Price Level LRAS Tools New Curve O

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

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Question

The graph below shows an economy operating at equilibrium in both the short run and long run at its full employment level of output.
a. Show what happens when this economy moves from its full-employment equilibrium into a period of stagflation. Use the graph
to draw either a new AD curve or new AS curve to demonstrate stagflation in this economy
Instructions: Use the tool provided "New Curve to plot the appropriate line. After placing the curve, click on "Select and choose
whether to label the curve "AD" or "AS" from the dropdown menu.
Aggregate Demand and Aggregate Supply
Price Level
LRAS
Tools
New Curve
0

b. Which of the following situations could cause an economy to experience stagflation?
An increase in government spending to repair roads and infrastructure
OA decrease in environmental regulations for firms, leading to a reduction in the cost of production
An increase in oil prices from domestic policies that make it more difficult to import oil
O An increase in the amount of taxes that people have to pay from their incomes

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