Based on the given figure, the economy is initially in long-run equilibrium at point A. If there is a favorable supply shock that increases potential output and shifts the long- run aggregate supply curve from LRAS to LRAS', then there is initially. the short-run aggregate supply curve will gap and Inflation A M C LRAS LRAS D E Y* Output Y SRAS' SRAS SRAS AD a. an expansionary: eventually shift to SRAS" b. an expansionary; eventually shift to SRAS' a recessionary; eventually shift to SRAS' d. a recessionary; eventually shift to SRAS" c.

Figure 34-2 PRICE LEVEL LRAS B QUANTITY OF OUTPUT AD₂ AD. SRAS, SRAS Refer to Figure 34-2. If the economy is in long-run equilibrium, a favorable shift in short-run aggregate supply curve would move the economy from A to B. B to C. ○ C to D. ○ D to A

For Shock C: Suppose the economy starts in the long run equilibrium. Illustrate changes that the shock will cause in the short run (using AD-SRAS). Explain why each curve shifts. Determine how the price level and output will be affected in the short run. Mark the output gap on the diagram. Is the output gap positive or negative? Is the economy is booming, or is it in a recession? On the same diagram illustrate how the economy will adjust to the shock in the long run and explain the mechanism. Determine how the price level and output will be affected in the long run.   C. Firms expect an economic boom in the coming years   As a result of this shock, in the short run the (SRAS Curve/AD Curve) will shift? In consequence, in the short run prices and output will? In the short run, there will be a ? (negative/postive) output gap,which means there will be a ? (boom/recession) As time passes, because of high unemployment the wages in the economy will? (decrease/increase) As a result,…

what is being illustarted in a shift in aggregate demand from AD0 to AD2?

PRICE LEVEL O a. C to D. Ob. D to C. Oc.B to A Od. A to B. D LRAS O B AD QUANTITY OF OUTPUT SRAS, SRAS AD Refer to Figure 34-2. If the economy is in long-run equilibrium, then an adverse shift in short-run aggregate supply would move the economy from

When a supply-side shock is assumed to be permanent: O only the LRAS curve shifts. O only the SRAS curve shifts. O both the LRAS curve and the SRAS curve shift. O nither the LRAS curve nor the SRAS curve shifts.

a) Think about the Model of Aggregate Demand and Aggregate Supply. How can this model beused to make predictions about the economy of Bangladesh?b) Use the sticky wage theory to explain in detail the upward slope of the SRAS supply curve?

The figure to the right shows an economy in a short-run equilibrium at point A Using the three-point curved line drawing tool, illustrate cost-push inflation. Properly label this curve Note: Carefully follow the instructions above and only draw the required object. Which of the following is most likely to cause the cost shock that shifts the AS curve consistent with cost-push inflation? A. A surge in the price of crude oil. OB. A tax increase on households. OC. An increase in the size of government. OD. A flood of new immigrants. Price level, Pa AD₂ Yo Aggregate output (income), Y AS du

In the dynamic model of AD-AS in the diagram to the right, the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues policy. This will result in OA. short term interest rates higher than what would occur if no policy had been pursued. OB. unemployment rates higher than what would occur if no policy had been pursued. OC. real GDP lower than what would occur if no policy had been pursued. OD. inflation higher than what would occur if no policy had been pursued. MIDD Price level 102 100 LRAS, A 10 Real GDP B 00 LRAS AD. 10.8 11 SRAS₁ SRAS, AD₂

The reason/s for the downward aggregate demand curve include: Select one: a. interest rate effect b. exports effect c. real balances effect d. none of the answers are correct e. all the answers are correct