If a negative supply shock causes the short-run aggregate supply curve to shift left, what will happen in the short run and what will happen in the long run? Assume government policymakers do not intervene.   a) In the short run, output will decrease, and the price level will increase; in the long run, output returns to its original level, but the price level is now permanently higher.    b)In the short run, output will increase, and the price level will decrease; in the long run, output returns to its original level, but the price level is now permanently higher.   c)In the short run, output will decrease, and the price level will increase; in the long run, output and the price level return to their original levels.   d)In the short run, output will decrease, and the price level will decrease; in the long run, output returns to its original level, but the price level is now permanently higher.

Suppose the full-employment level of real output ( Q) for a hypothetical economy is $250 and the price level (P ) initially is 100. Use the short-run aggregate supply schedules below to answer the questions that follow: a. What will be the level of real output in the short run if the price level unexpectedly rises from 100 to 125 because of an increase in aggregate demand? What if the price level unexpectedly falls from 100 to 75 because of a decrease in aggregate demand? Explain each situation, using figures from the table.b. What will be the level of real output in the long run when the price level rises from 100 to 125? When it falls from 100 to 75? Explain each situation.c. Show the circumstances described in parts a and b on graph paper, and derive the long-run aggregate supply curve.

Assume the Federal Reserve triples the growth rate of the quantity of money in circulation. In the long run, this increase in money growth will affect which of the following? Check all that apply. Suppose when unemployment is at its natural rate the economy produces a level of real GDP equal to $60 billion. Using the purple points (diamond symbol) plot the economy's long-run aggregate supply (LRAS) curve on the graph. PRICE LEVEL 132 128 124 120 116 112 108 The quantity of physical capital The size of the labor force The level of technological knowledge The inflation rate 104 100 0 + + 10 20 30 40 50 60 70 OUTPUT (Billions of dollars) 80 90 100 LRAS Suppose now the government passes a law that significantly increases the minimum wage. This change in policy will cause the natural rate of unemployment to which will:

Please highlight the correct answer for each of the two questions and if you can please explain why it is correct.

Suppose there is a major breakthrough in renewable energy technology, leading to a surge in investment by businesses to adopt this new technology. Using the aggregate demand-aggregate supply model, what impact will this have on the economy?   a) This will shift aggregate demand left, which will cause output to fall and the price level to fall. b) This will shift aggregate demand right, which will cause output to rise and the price level to rise. c) This will shift short-run aggregate supply left, which will cause output to fall and the price level to rise. d) This will shift short-run aggregate supply right, which will cause output to rise and the price level to fall.

Which of these will shift the short-run aggregate supply curve to the right? an increase in the actual price level an increase in the minimum wage an increase in immigration from other countries an increase in the price of oil

The following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 180. 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 180, but the actual price level turns out to be 240. 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) 380 300 240 180 80 0 3 SRAS[180] 9 12 REAL GDP (Trillions of dollars) 15 18 0 SRAS[180] 0

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 40 0 0 3 SRAS[120] 6 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:

1)Potential output is the same as long-run aggregate supply. Select one: True False   2)An increase in the price level will cause a decrease in the aggregate amount of output supplied. Select one: True False

The only way to rationalize an upward slope for the short-run aggregate-supply curve is to argue that wages are sticky in the short run. False True