Economics 8 Using the graph, illustrate the long-run impact of the business pessimism by shifting both the aggregate demand (AD) curve and the short-runaggregate supply (AS) curve in the appropriate directions.PRICE LEVEL240200160120804000200400600800OUTPUT (Billions of dollars)ASAD10001200In the long run, due to the business pessimism, the price leveloutput, and the unemployment ratethe natural rate.ADģAS, the quantity of outputthe natural level of 8. Economic fluctuations IThe following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion.Suppose firms become pessimistic about future business conditions and cut back on investment spending.Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the businesspessimism.PRICE LEVEL240200160120804000200400600800OUTPUT (Billions of dollars)ASAD10001200oADAS(?)In the short run, the decrease in investment spending associated with business pessimism causes the price level topeople expected and the quantity of output totothe price level▼ the natural level of output. The business pessimism will cause the unemployment ratethe natural rate of unemployment in the short run.Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output levelof $600 billion, prior to the decrease in investment spending associated with business pessimism.Along the transition from the short run to the long run, price-level expectations willcurve will shift to theand the

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Using the graph, illustrate the long-run impact of the business pessimism by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve in the appropriate directions. PRICE LEVEL 240 200 160 120 80 40 0 0 200 400 600 800 OUTPUT (Billions of dollars) AS AD 1000 1200 In the long run, due to the business pessimism, the price level output, and the unemployment rate the natural rate. | 2 | 2 ? the quantity of output the natural level of

Using the graph, illustrate the long-run impact of the business pessimism by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve in the appropriate directions. PRICE LEVEL 240 200 160 120 80 40 0 0 200 400 600 800 OUTPUT (Billions of dollars) AS AD 1000 1200 In the long run, due to the business pessimism, the price level output, and the unemployment rate the natural rate. | 2 | 2 ? the quantity of output the natural level of

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Question

Economics 8

Using the graph, illustrate the long-run impact of the business pessimism by shifting both the aggregate demand (AD) curve and the short-run
aggregate supply (AS) curve in the appropriate directions.
PRICE LEVEL
240
200
160
120
80
40
0
0
200
400
600
800
OUTPUT (Billions of dollars)
AS
AD
1000
1200
In the long run, due to the business pessimism, the price level
output, and the unemployment rate
the natural rate.
AD
ģ
AS
, the quantity of output
the natural level of

8. Economic fluctuations I
The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $600 billion.
Suppose firms become pessimistic about future business conditions and cut back on investment spending.
Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the business
pessimism.
PRICE LEVEL
240
200
160
120
80
40
0
0
200
400
600
800
OUTPUT (Billions of dollars)
AS
AD
1000
1200
o
AD
AS
(?)
In the short run, the decrease in investment spending associated with business pessimism causes the price level to
people expected and the quantity of output to
to
the price level
▼ the natural level of output. The business pessimism will cause the unemployment rate
the natural rate of unemployment in the short run.
Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level
of $600 billion, prior to the decrease in investment spending associated with business pessimism.
Along the transition from the short run to the long run, price-level expectations will
curve will shift to the
and the

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