Blank 1 answer choices: no change, an increase, a decreaseBlank 2 answer choices: no change in level output, more output, less output Since nominal wages were constant as the price level changed, you explain that an increase in the price level leads toThis, in turn, leads to which of the following?O Firms hire fewer workers.Workers mistakenly believe that their real wages have fallen and supply less labor.O Firms hire more workers.O Workers mistakenly believe that their real wages have risen and supply more labor.Ultimately, an increase in the price level leads tobeing produced in the short run.in real wages. This graph shows the short-run aggregate supply curve (SRAS) of a hypothetical economy where the currency is the dollar. Last year, the economywas producing at point A. The price level was 135 and the quantity of real GDP supplied was $300 billion. This year, the economy is producing at pointB. The price level has risen to 145 and the quantity of real GDP supplied has risen to $500 billion and nominal wages were constant as the price levelchanged. Government officials are confused about why the quantity of output moved from point A to point B, and they ask you for help.PRICE LEVEL1601551501451401301251200100Short-Run Aggregate SupplyAB+|"11|200 300 400 500REAL GDP (Billions of dollars)600700SRAS800

Answered: This graph shows the short-run…

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

Blank 1 answer choices: no change, an increase, a decrease

Blank 2 answer choices: no change in level output, more output, less output

Since nominal wages were constant as the price level changed, you explain that an increase in the price level leads to
This, in turn, leads to which of the following?
O Firms hire fewer workers.
Workers mistakenly believe that their real wages have fallen and supply less labor.
O Firms hire more workers.
O Workers mistakenly believe that their real wages have risen and supply more labor.
Ultimately, an increase in the price level leads to
being produced in the short run.
in real wages.

This graph shows the short-run aggregate supply curve (SRAS) of a hypothetical economy where the currency is the dollar. Last year, the economy
was producing at point A. The price level was 135 and the quantity of real GDP supplied was $300 billion. This year, the economy is producing at point
B. The price level has risen to 145 and the quantity of real GDP supplied has risen to $500 billion and nominal wages were constant as the price level
changed. Government officials are confused about why the quantity of output moved from point A to point B, and they ask you for help.
PRICE LEVEL
160
155
150
145
140
130
125
120
0
100
Short-Run Aggregate Supply
A
B
+
|
"
1
1
|
200 300 400 500
REAL GDP (Billions of dollars)
600
700
SRAS
800

Expert Solution

Step 1

Given,

$A g r a p h s h o w s t h e S R A S c u r v e w h e r e l a s t y e a r t h e e c o n o m y w a s p r o d u c i n g a t p o i n t A w h e r e t h e p r i c e l e v e l w a s 135 a n d q u a n t i t y o f r e a l G D P w a s $ 300 B i l l i o n T h i s y e a r t h e e c o n o m y i s p r o d u c i n g a t p o i n t B w h e r e p r i c e l e v e l h a s r i s e n t o 145 a n d r e a l G D P h a s r i s e d t o $ 500 b i l l i o n . N o m i n a l w a g e s r e a m a i n c o n s \tan t .$

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