The graphs illustrate an initial equilibrium for the economy. Suppose that the Federal Reserve raises interest rates. 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 GDP in the short run and in the long run. Aggregate price level Short-run graph LRAS In the short run, the price level GDP Real GDP SRAS Short-run equilibrium, AD and Aggregate price level Long-run graph LRAS SRAS Long-run equilibrium, * AD GDP Real GDP In the long run, the price level and

The graphs illustrate an initial equilibrium for the economy. Suppose that the Federal Reserve raises interest rates. 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 GDP in the short run and in the long run. Aggregate price level Short-run graph LRAS In the short run, the price level GDP Real GDP SRAS Short-run equilibrium, AD and Aggregate price level Long-run graph LRAS SRAS Long-run equilibrium, * AD GDP Real GDP In the long run, the price level and

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The graphs illustrate an initial equilibrium for the economy. Suppose that the Federal Reserve raises interest rates.
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 GDP in the short run and in the long run.
Aggregate price level
Short-run graph
GDP
In the short run, the price level
LRAS
Real GDP
SRAS
Short-run equilibrium
AD
and
Aggregate price level
Long-run graph
LRAS
Real GDP
In the long run, the price level
GDP
SRAS
Long-run equilibrium
AD
and

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