The graphs illustrate an initial equilibrium for the economy. Suppose that firms' expectations of future profits increase. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and real GDP (or aggregate output) in the short run and in the long run. Aggregate price level Short-run graph LRAS SRAS Short-run equilibrium Real GDP AD Aggregate price level Long-run graph LRAS SRAS Long-run equilibrium Real GDP AD

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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The graphs illustrate an initial equilibrium for the economy. Suppose that firms' expectations of future profits increase.
Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run
aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting
from this change. Then, indicate what happens to the price level and real GDP (or aggregate output) in the short run and in
the long run.
Aggregate price level
Short-run graph
LRAS
SRAS
Short-run equilibrium
Real GDP
AD
Aggregate price level
Long-run graph
LRAS
SRAS
Long-run equilibrium
Real GDP
AD
Transcribed Image Text:The graphs illustrate an initial equilibrium for the economy. Suppose that firms' expectations of future profits increase. Use the graphs to show the new positions of aggregate demand (AD), short-run aggregate supply (SRAS), and long-run aggregate supply (LRAS) in both the short run and the long run, as well as the short-run and long-run equilibriums resulting from this change. Then, indicate what happens to the price level and real GDP (or aggregate output) in the short run and in the long run. Aggregate price level Short-run graph LRAS SRAS Short-run equilibrium Real GDP AD Aggregate price level Long-run graph LRAS SRAS Long-run equilibrium Real GDP AD
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