The following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 120. The economy's full- employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 160. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. PRICE LEVEL (CPI) 240 200 160 120 80 40 0 3 SRAS[120] 9 12 REAL GDP (Trillions of dollars) 15 18 SRAS[120] 0 (? Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph: less/more The higher-than-expected price level causes firms to earn profit than they expected on each unit of output they produce, and, therefore, decrease/increaseir production level. At the same time, the real value of wages and other resource prices is lower/higher than workers and they firms expected when they signed long-term contracts. As a result, the economy as a whole produces at a level output, and the unemployment rate is than its natural rate. its full-employment above/below
The following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 120. The economy's full- employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 160. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. PRICE LEVEL (CPI) 240 200 160 120 80 40 0 3 SRAS[120] 9 12 REAL GDP (Trillions of dollars) 15 18 SRAS[120] 0 (? Interpret the change you drew on the previous graph by filling in the blanks in the following paragraph: less/more The higher-than-expected price level causes firms to earn profit than they expected on each unit of output they produce, and, therefore, decrease/increaseir production level. At the same time, the real value of wages and other resource prices is lower/higher than workers and they firms expected when they signed long-term contracts. As a result, the economy as a whole produces at a level output, and the unemployment rate is than its natural rate. its full-employment above/below
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Need help with this. Please show how to do the graphs. I showed with lines where you can move them to and of course while you read the paragraphs you will be able to know it. Thanks!
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I have a question regarding the last graph that you did. I cannot shift the SRAS like you did. Check the two ScreenShots that I attached. Which one will be correct one ?
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