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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 145 and the quantity of real GDP supplied was $500 billion. This year, the economy is producing at point B. The price level has fallen to 135 and the quantity of real GDP supplied has fallen to $300 billion and nominal wages fell by the same percentage as the price level. 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 160 155 150 145 140 135 130 125 120 0 Short-Run Aggregate Supply SRAS 100 200 300 400 500 600 700 800 REAL GDP (Billions of dollars) ? Since nominal wages fell by the same percentage as the price level, you explain that a decrease in the price level leads to 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 145 and the quantity of real GDP supplied was $500 billion. This year, the economy is producing at point B. The price level has fallen to 135 and the quantity of real GDP supplied has fallen to $300 billion and nominal wages fell by the same percentage as the price level. 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 160 155 150 145 140 135 130 125 120 0 Short-Run Aggregate Supply SRAS 100 200 300 400 500 600 700 800 REAL GDP (Billions of dollars) ? Since nominal wages fell by the same percentage as the price level, you explain that a decrease in the price level leads to in real wages.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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5. Why the short-run aggregate supply curve slopes upward 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 145 and the quantity of real GDP supplied was $500 billion. This year, the economy is producing at point B. The price level has fallen to 135 and the quantity of real GDP supplied has fallen to $300 billion and nominal wages fell by the same percentage as the price level. 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 160 155 150 125 120 0 100 Short-Run Aggregate Supply I I 200 300 400 500 600 REAL GDP (Billions of dollars) SRAS 700 800 ? Sin nominal wages fell by the same percentage as the price level, you explain that a decrease in the price level leads to in real wages. 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. Workers mistakenly believe that their real wages have risen and supply more labor. Firms hire more workers. Ultimately, a decrease in the price level leads to short run. being produced in the
Transcribed Image Text:5. Why the short-run aggregate supply curve slopes upward 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 145 and the quantity of real GDP supplied was $500 billion. This year, the economy is producing at point B. The price level has fallen to 135 and the quantity of real GDP supplied has fallen to $300 billion and nominal wages fell by the same percentage as the price level. 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 160 155 150 125 120 0 100 Short-Run Aggregate Supply I I 200 300 400 500 600 REAL GDP (Billions of dollars) SRAS 700 800 ? Sin nominal wages fell by the same percentage as the price level, you explain that a decrease in the price level leads to in real wages. 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. Workers mistakenly believe that their real wages have risen and supply more labor. Firms hire more workers. Ultimately, a decrease in the price level leads to short run. being produced in the
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