The graph shows the aggregate demand and long-run aggregate supply (LRAS) curves for a given economy. Show the effect of a real shock that results in potential real GDP changing to 6% by shifting the relevant curve or curves. Inflation rate (%) 4 LRAS 12 11 10 9 8 6 3 Aggregate Demand 2 1 0 -4 -2 ° 2 4 6 8 10 Real GDP growth rate (%) 12 14 16 Which three factors could have caused this change in potential real GDP? Assume this is a typical economy relying on inputs such as coal and oil. Factors Answer Bank riots and political instability good farming weather oil price increase coal price decrease increased consumer confidence an improvement in technology an increase in exports a major bird flu pandemic
The graph shows the aggregate demand and long-run aggregate supply (LRAS) curves for a given economy. Show the effect of a real shock that results in potential real GDP changing to 6% by shifting the relevant curve or curves. Inflation rate (%) 4 LRAS 12 11 10 9 8 6 3 Aggregate Demand 2 1 0 -4 -2 ° 2 4 6 8 10 Real GDP growth rate (%) 12 14 16 Which three factors could have caused this change in potential real GDP? Assume this is a typical economy relying on inputs such as coal and oil. Factors Answer Bank riots and political instability good farming weather oil price increase coal price decrease increased consumer confidence an improvement in technology an increase in exports a major bird flu pandemic
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The graph shows the aggregate demand and long-run aggregate supply (LRAS) curves for a given economy. Show the effect
of a real shock that results in potential real GDP changing to 6% by shifting the relevant curve or curves.
Inflation rate (%)
4
LRAS
12
11
10
9
8
6
3
Aggregate Demand
2
1
0
-4
-2
°
2 4 6 8 10
Real GDP growth rate (%)
12 14 16
Which three factors could have caused this change in potential real GDP? Assume this is a typical economy relying on inputs
such as coal and oil.
Factors
Answer Bank
riots and political instability
good farming weather
oil price increase
coal price decrease
increased consumer confidence
an improvement in technology
an increase in exports
a major bird flu pandemic
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