ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Step 1: Short-Run Equilibrium
The following graph shows an aggregate demand (AD) curve and a short-run aggregate supply
(SRAS) curve for an economy. Suppose that the economy is initially in a short-run
equilibrium: at PE, and Real GDP is 10 trillion.
Suppose that at some point, the price increases to p*.
PRICE LEVEL
0 2
At p*, there is
firms
SRAS
6
B 10 12 14 16
REAL GDP (Trillion Dollars)
of $
AD
18 20
trillion goods. As a result, the price level
output, and consumers
consumption.
Step 2: Changes in Short-Run Equilibrium
The following graph shows an aggregate demand (AD) curve and a short-run aggregate supply
(SRAS) curve for an economy. Suppose the economy is initially in a short-run equilibrium at
expand button
Transcribed Image Text:Step 1: Short-Run Equilibrium The following graph shows an aggregate demand (AD) curve and a short-run aggregate supply (SRAS) curve for an economy. Suppose that the economy is initially in a short-run equilibrium: at PE, and Real GDP is 10 trillion. Suppose that at some point, the price increases to p*. PRICE LEVEL 0 2 At p*, there is firms SRAS 6 B 10 12 14 16 REAL GDP (Trillion Dollars) of $ AD 18 20 trillion goods. As a result, the price level output, and consumers consumption. Step 2: Changes in Short-Run Equilibrium The following graph shows an aggregate demand (AD) curve and a short-run aggregate supply (SRAS) curve for an economy. Suppose the economy is initially in a short-run equilibrium at
Step 2: Changes in Short-Run Equilibrium
The following graph shows an aggregate demand (AD) curve and a short-run aggregate supply
(SRAS) curve for an economy. Suppose the economy is initially in a short-run equilibrium at
PE, and Real GDP is 10trillion.
At some point, the economy experiences an increase in wage rates.
Adjust the following graph to show the effect of an increase in wage rates on the economy.
(?)
Price Level
a
0
2
6
8 10 12 14
Real GDP (Trillions Dollars)
SRAS
AD
18
中田中器
SRAS
Which of the following best describes the effect of an increase in wage rates?
The price level rises above PE, but the Real GDP remains the same.
The price level rises above PE, and the Real GDP decreases to $6 trillion.
The price level falls below PE, and the Real GDP increases to $6 trillion.
The price level remains the same, but the Real GDP decreases to $6 trillion.
Suppose the economy experiences an increase in the interest rate. Adjust the graph to show
the effect of an increase in the interest rate on the economy.
Which of the following best describes the effect of an increase in the interest rate?
The price level falls even further below PE, and Real GDP decreases from $6 trillion
to $4 trillion.
The price level rises even higher above PE, and Real GDP increases from $6 trillion
to $4 trillion.
The price level falls but still remains above PE and Real GDP decreases further from
$6 trillion to $4 trillion.
The price level rises back to PE, and Real GDP increases from $6 trillion to $4
trillion.
expand button
Transcribed Image Text:Step 2: Changes in Short-Run Equilibrium The following graph shows an aggregate demand (AD) curve and a short-run aggregate supply (SRAS) curve for an economy. Suppose the economy is initially in a short-run equilibrium at PE, and Real GDP is 10trillion. At some point, the economy experiences an increase in wage rates. Adjust the following graph to show the effect of an increase in wage rates on the economy. (?) Price Level a 0 2 6 8 10 12 14 Real GDP (Trillions Dollars) SRAS AD 18 中田中器 SRAS Which of the following best describes the effect of an increase in wage rates? The price level rises above PE, but the Real GDP remains the same. The price level rises above PE, and the Real GDP decreases to $6 trillion. The price level falls below PE, and the Real GDP increases to $6 trillion. The price level remains the same, but the Real GDP decreases to $6 trillion. Suppose the economy experiences an increase in the interest rate. Adjust the graph to show the effect of an increase in the interest rate on the economy. Which of the following best describes the effect of an increase in the interest rate? The price level falls even further below PE, and Real GDP decreases from $6 trillion to $4 trillion. The price level rises even higher above PE, and Real GDP increases from $6 trillion to $4 trillion. The price level falls but still remains above PE and Real GDP decreases further from $6 trillion to $4 trillion. The price level rises back to PE, and Real GDP increases from $6 trillion to $4 trillion.
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