The short-run economic outcome resulting from the increase in production costs is known as——- Suppose now that the government immediately pursues an accommodative policy by increasing government purchases in response to the short-run impact of the higher oil prices. In the long run, given that the government pursues accommodative policy, the output level in the economy will equal ——- level will equal——

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The short-run economic outcome resulting from the increase in production costs is known as——- Suppose now that the government immediately pursues an accommodative policy by increasing government purchases in response to the short-run impact of the higher oil prices. In the long run, given that the government pursues accommodative policy, the output level in the economy will equal ——- level will equal———
Homework (Ch 33)
9. Economic Tiuctuations II
The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (AS), and the long-run aggregate supply curve
(LRAS) for a hypothetical economy. Initially, the expected price level equals the actual price level, and the economy experiences long-run equilibrium
at a natural level of output of $100 billion.
Suppose war in the world's main oil-producing region sharply reduces the world oil supply, causing oil prices to rise and increasing the costs of
producing goods and services.
Use the graph to help you answer the questions about the short-run and long-run effects of the increase in production costs that follow. (Note: You
will not be graded on any adjustments made to the graph.)
Hint: For simplicity, ignore any possible impact of the higher oil prices on the natural level of output.
120
115
110
LRAS
AS
3
hp
1940
AD
0 US
Transcribed Image Text:Homework (Ch 33) 9. Economic Tiuctuations II The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve (AS), and the long-run aggregate supply curve (LRAS) for a hypothetical economy. Initially, the expected price level equals the actual price level, and the economy experiences long-run equilibrium at a natural level of output of $100 billion. Suppose war in the world's main oil-producing region sharply reduces the world oil supply, causing oil prices to rise and increasing the costs of producing goods and services. Use the graph to help you answer the questions about the short-run and long-run effects of the increase in production costs that follow. (Note: You will not be graded on any adjustments made to the graph.) Hint: For simplicity, ignore any possible impact of the higher oil prices on the natural level of output. 120 115 110 LRAS AS 3 hp 1940 AD 0 US
Homework (Ch 33)
PRICE LEVEL
120
115
110 +
105 +
100
95
90
85
80
→
80
85
LRAS
90
95
100
105
OUTPUT (Billions of dollars)
AS
AD
110
115
120
1
AD
-
AS
LRAS
The short-run economic outcome resulting from the increase in production costs is known as
0
Transcribed Image Text:Homework (Ch 33) PRICE LEVEL 120 115 110 + 105 + 100 95 90 85 80 → 80 85 LRAS 90 95 100 105 OUTPUT (Billions of dollars) AS AD 110 115 120 1 AD - AS LRAS The short-run economic outcome resulting from the increase in production costs is known as 0
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