This graph shows an increase in aggregate supply in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve (SRAS) shifts to the right from SRAS₁ to SRAS₂, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion. PRICE LEVEL 200 175 150 125 100 75 50 25 0 0 50 100 150 200 250 REAL GDP (Billions of dollars) 300 I I 350 SRAS₁ 400 SRAS 2

This graph shows an increase in aggregate supply in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve (SRAS) shifts to the right from SRAS₁ to SRAS₂, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion. PRICE LEVEL 200 175 150 125 100 75 50 25 0 0 50 100 150 200 250 REAL GDP (Billions of dollars) 300 I I 350 SRAS₁ 400 SRAS 2

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Using an AD/AS diagram (starting from long-run/full employment equilibrium), graphically show and verbally describe how each of the following events would affect the U.S. economy's equilibrium real GDP and price level. a. Discovery and implementation of new technology b. Mexico's economic growth increases faster than ours c. There is a general increase in the price of raw materials e. The cost of labor (wages) rises g. The price of oil is expected to fall d. The number of workers in the labor force decreases due to pandemic retirements/death f. A new Congress decreases government spending h. Consumer confidence falls
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