Which of the following statements best describes how the economy will adjust on its own in the long run?Low unemployment contributes to an increase in aggregate demand. The aggregate demand curve shifts tothe right until the economy is back at the long-run equilibrium.Nominal wages rise and the SRAS curve shifts to the left until the economy is back at the long-run equilibrium.Nominal wages fall and the SRAS curve shifts to the right until the economy is back at the long-runequilibrium.High unemployment contributes to a decrease in aggregate demand. The aggregate demand curve shifts tothe left until the economy is back at the long-run equilibrium. 11. Applying the extended AD-AS modelAa AaFinancial crises, such as the one that impacted many developed countries starting in 2007, decrease banks' abilityand willingness to make loans. Decreased availability of credit decreases businesses' ability to make investmentpurchases and consumers' ability to buy goods and services. As a result, a financial crisis is a negative shock for aneconomy.The following graph shows an economy's aggregate demand curve and its short-run and long-run aggregate supplycurves after a financial crisis has pushed it into recession.Suppose that the government decides not to use stabilization policy and allows the economy to adjust on its own.Determine which curve, the aggregate demand curve or the short-run aggregate supply curve, shifts when theeconomy adjusts in the long run.Use either the purple line (triangle symbols) to plot a new aggregate demand curve or the tan line (dash symbols) toplot a new short-run aggregate supply curve, to show the economy in long-run equilibrium. Make sure the curve youplot is parallel to one of the existing curves. (Note: You can check the slope of a line by hovering over it with yourcursor.)AGGREGATE PRICE LEVEL200180160140120100806040200211LRASSRASAD4 6 8 10 12 14 16 18 20REAL GDP (Trillions of dollars]New ADNew SRASHelpClear All

In case of unemployment there would be a downward pressure on wages => the cost of production of…

Which of the following statements best describes how the economy will adjust on its own in the long run? Low unemployment contributes to an increase in aggregate demand. The aggregate demand curve shifts to the right until the economy is back at the long-run equilibrium. Nominal wages rise and the SRAS curve shifts to the left until the economy is back at the long-run equilibrium. Nominal wages fall and the SRAS curve shifts to the right until the economy is back at the long-run equilibrium. High unemployment contributes to a decrease in aggregate demand. The aggregate demand curve shifts to the left until the economy is back at the long-run equilibrium.

Which of the following statements best describes how the economy will adjust on its own in the long run? Low unemployment contributes to an increase in aggregate demand. The aggregate demand curve shifts to the right until the economy is back at the long-run equilibrium. Nominal wages rise and the SRAS curve shifts to the left until the economy is back at the long-run equilibrium. Nominal wages fall and the SRAS curve shifts to the right until the economy is back at the long-run equilibrium. High unemployment contributes to a decrease in aggregate demand. The aggregate demand curve shifts to the left until the economy is back at the long-run equilibrium.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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