Which of the following would shift the short-run aggregate supply (SRAS) curve to the right, ignoring any potential effect on long-run aggregate supply (LRAS)? There is a technological improvement that allows firms to reduce their costs of production permanently. O The interest rate decreases, spurring investment spending. O The government introduces a set of new regulations that make it more costly for firms to produce and sell goods and services. These regulations are expected to be permanent. O There is an increase in government spending. O The world price of oil increases rapidly without warning but is not expected to remain at the new high level permanently. However, in the short run, it is more costly for all firms to produce goods and services. The following graph shows the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve for an economy. Suppose the world price of oil decreases rapidly without warning but is not expected to remain at the new low level permanently. However, in the short run, it is less costly for firms to produce goods and services. Illustrate the short-run effect of this change, before any long-run adjustments have taken place, by shifting one or both of the supply curves ( SRAS and LRAS) on the following graph. If you do not believe there will be any long-term effects, leave the LRAS in its current position. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back
Which of the following would shift the short-run aggregate supply (SRAS) curve to the right, ignoring any potential effect on long-run aggregate supply (LRAS)? There is a technological improvement that allows firms to reduce their costs of production permanently. O The interest rate decreases, spurring investment spending. O The government introduces a set of new regulations that make it more costly for firms to produce and sell goods and services. These regulations are expected to be permanent. O There is an increase in government spending. O The world price of oil increases rapidly without warning but is not expected to remain at the new high level permanently. However, in the short run, it is more costly for all firms to produce goods and services. The following graph shows the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve for an economy. Suppose the world price of oil decreases rapidly without warning but is not expected to remain at the new low level permanently. However, in the short run, it is less costly for firms to produce goods and services. Illustrate the short-run effect of this change, before any long-run adjustments have taken place, by shifting one or both of the supply curves ( SRAS and LRAS) on the following graph. If you do not believe there will be any long-term effects, leave the LRAS in its current position. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graph shows the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve for an economy. Suppose
the world price of oil decreases rapidly without warning but is not expected to remain at the new low level permanently. However, in the short run, it is
less costly for firms to produce goods and services.
Illustrate the short-run effect of this change, before any long-run adjustments have taken place, by shifting one or both of the supply curves (
SRAS and LRAS) on the following graph. If you do not believe there will be any long-term effects, leave the LRAS in its current position.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back
to its original position, just drag it a little farther.
PRICE LEVEL
LRAS
SRAS
X
6
12
18
REAL GDP (Trillions of dollars)
240
200
160
80
40
0
0
24
AD
0
SRAS
LRAS
(?
Assume that aggregate demand is unaffected by the oil price drop. After the economy has fully adjusted to the oil price drop, the long-run effect is
in aggregate output and
in the price level.
Transcribed Image Text:3. Shifts of the aggregate supply curve
Which of the following would shift the short-run aggregate supply (SRAS) curve to the right, ignoring any potential effect on long-run aggregate supply
(LRAS)?
Ⓒ There is a technological improvement that allows firms to reduce their costs of production permanently.
O The interest rate decreases, spurring investment spending.
O The government introduces a set of new regulations that make it more costly for firms to produce and sell goods and services. These
regulations are expected to be permanent.
O There is an increase in government spending.
O The world price of oil increases rapidly without warning but is not expected to remain at the new high level permanently. However, in the
short run, it is more costly for all firms to produce goods and services.
The following graph shows the short-run aggregate supply (SRAS) curve and the long-run aggregate supply (LRAS) curve for an economy. Suppose
the world price of oil decreases rapidly without warning but is not expected to remain at the new low level permanently. However, in the short run, it is
less costly for firms to produce goods and services.
Illustrate the short-run effect of this change, before any long-run adjustments have taken place, by shifting one or both of the supply curves (
SRAS and LRAS) on the following graph. f you do not believe there will be any long-term effects, leave the LRAS in its current position.
Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back
to its original position, just drag it a little farther.
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