Questions 4 & 5 # Topic 3.6: Changes in the AD-AS Model in the Short Run## Graph DescriptionThe image shows a graph depicting the Aggregate Demand (AD) and Aggregate Supply (AS) model in the short run. The graph is essential in understanding the impacts of various economic shifts on price levels and output (GDP).### Graph Elements:- **Axes**: - The vertical axis represents the Price Level, labeled with points PL1, PL2, PL3, and PL4. - The horizontal axis represents GDP, marked with outputs Y1, Y2, Y3, and Yf (full employment output).- **Curves**: - **AD Curve**: Downward sloping, represents Aggregate Demand. - **SRAS (Short-Run Aggregate Supply) Curve**: Upward sloping, represents Short-Run Aggregate Supply. - **LRAS (Long-Run Aggregate Supply) Line**: Vertical, represents the economy's full employment output.## QuestionsUse the graph to the right to answer the following questions (assume that each event takes place independently):1. What is the short-run equilibrium price level and output?2. Identify the short-run equilibrium price level and output if consumption increased.3. Identify the short-run equilibrium price level and output after a negative supply shock.4. What happens to output and unemployment if investment falls?5. Use the graph to explain the difference between demand-pull and cost-push inflation.

In the short run, the aggregate demand-aggregate supply (AD-AS) model provides valuable insights…

Topic 3.6- Changes in the AD-AS Model in the Short Run Price Level PL₁ PL₂ PL, PL, LRAS SRAS AD Y, GDPR Use the graph to the right to answer the following questions (assume that each event takes places independently) 1. What is the short-run equilibrium price level and output? 2. Identify the short-run equilibrium price level and output if consumption increased? 3. Identify the short-run equilibrium price level and output after a negative supply shock? 4. What happens to output and unemployment if investment falls? 5. Use the graph to explain the difference between demand-pull and costs-push inflation.

Topic 3.6- Changes in the AD-AS Model in the Short Run Price Level PL₁ PL₂ PL, PL, LRAS SRAS AD Y, GDPR Use the graph to the right to answer the following questions (assume that each event takes places independently) 1. What is the short-run equilibrium price level and output? 2. Identify the short-run equilibrium price level and output if consumption increased? 3. Identify the short-run equilibrium price level and output after a negative supply shock? 4. What happens to output and unemployment if investment falls? 5. Use the graph to explain the difference between demand-pull and costs-push inflation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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