Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 24, Problem 24.2.9PA
To determine
The reason for the movement along the SRAS and shift in SRAS.
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Students have asked these similar questions
The following graph shows the short-run and long-run aggregate supply curves (SRAS and LRAS) for an economy.
Suppose there is a technological improvement that allows firms to reduce their costs of production permanently.
Drag one or both of the curves on the graph to illustrate the long-term effects of this change. If you don't believe there will be any long-term effects,
leave the curves where they are.
240
LRAS
SRAS
200
SRAS
160
LRAS
120
80
40
6
12
18
24
REAL GDP (Trillions of dollars)
Assuming aggregate demand is not affected by the technological improvement, the long-run effect of this
v supply shock
is
v in aggregate output and
v in the price level.
PRICE LEVEL
The following graph shows an increase in short-run aggregate supply (SRAS) in a hypothetical economy. Specifically, short-run aggregate supply
shifts to the right from SRAS₁ to SRAS2, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion.
Review the graph and then complete the table that follows.
PRICE LEVEL
200
175
150
125
100
75
50
25
0
0
50
SRAS
SRAS₂
100 150 200 250 300 350 400
REAL GDP (Billions of dollars)
?
The following table lists several determinants of short-run aggregate supply. Complete the table by indicating the change needed in each determinant
to increase short-run aggregate supply.
Determinant
Change Needed to Increase SRAS
Input Prices
increase or decrease
Burdensome Regulations increase or decrease
Technology
decline or improvement
The following graph shows an aggregate demand curve (AD) illustrating the inverse relationship between the price level and the quantity of Real GDP
in the United States.
During World War II, the United States increased military spending.
Show the effect of the following scenario on the aggregate demand curve by dragging the curve or moving the point to the appropriate position.
Note: Tool tip: To move the curve, click and drag any part of the curve. The curve will snap into position, so if you try to move it and it snaps back to
its original position, just try again and drag it a little farther.
PRICE LEVEL
Aggregate Demand
I
I
"
I
1
REAL GDP
AD
AD
(?)
Chapter 24 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 24 - Prob. 24.1.1RQCh. 24 - Prob. 24.1.2RQCh. 24 - Prob. 24.1.3RQCh. 24 - Prob. 24.1.4PACh. 24 - Prob. 24.1.5PACh. 24 - Prob. 24.1.6PACh. 24 - Prob. 24.1.7PACh. 24 - Prob. 24.1.8PACh. 24 - Prob. 24.1.9PACh. 24 - Prob. 24.1.10PA
Ch. 24 - Prob. 24.2.1RQCh. 24 - Prob. 24.2.2RQCh. 24 - Prob. 24.2.4RQCh. 24 - Prob. 24.2.5RQCh. 24 - Prob. 24.2.6PACh. 24 - Prob. 24.2.7PACh. 24 - Prob. 24.2.8PACh. 24 - Prob. 24.2.9PACh. 24 - Prob. 24.2.10PACh. 24 - Prob. 24.2.11PACh. 24 - Prob. 24.2.12PACh. 24 - Prob. 24.2.13PACh. 24 - Prob. 24.2.14PACh. 24 - Prob. 24.2.15PACh. 24 - Prob. 24.3.1RQCh. 24 - Prob. 24.3.2RQCh. 24 - Prob. 24.3.3RQCh. 24 - Prob. 24.3.4PACh. 24 - Prob. 24.3.5PACh. 24 - Prob. 24.3.6PACh. 24 - Prob. 24.3.7PACh. 24 - Prob. 24.3.8PACh. 24 - Prob. 24.3.9PACh. 24 - Prob. 24.3.10PACh. 24 - Prob. 24.4.1RQCh. 24 - Prob. 24.4.2RQCh. 24 - Prob. 24.4.3RQCh. 24 - Prob. 24.4.4PACh. 24 - Prob. 24.4.5PACh. 24 - Prob. 24.4.6PACh. 24 - Prob. 24.4.7PACh. 24 - Prob. 24.4.8PACh. 24 - Prob. 24.4.9PACh. 24 - Prob. 24.4.10PACh. 24 - Prob. 24.2RDECh. 24 - Prob. 24.1CTECh. 24 - Prob. 24.2CTE
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Similar questions
- On the following graph, use the purple Mine (diamond symbol) plot this economy's long-run aggregate supply (LRAS) curve. Then use the orange ne segments (square symbol) to plat the economy's shart-run aggregate supply (AS) curve at each of the following price levels: 100, 105, 110, 115, and 120, PRICE LEVEL 116 110 105 100 80 75 0 + 10 20 30 40 90 70 OUTPUT (ons of dollars) 85 120 AS LRAS The short-run quantity of output supplied by firms will fall short of the natural level of output when the actual price level level that people expected. the pricearrow_forwardIllustrate each of the following situations with a graph showing the Short-run Aggregate Supply curve: a. A decrease in productivity of labor and capitalarrow_forwardDeterminants of aggregate supply The following graph shows an increase in short-run aggregate supply (AS) in a hypothetical economy where the currency is the dollar. Specifically, the short-run aggregate supply curve shifts to the right from AS1AS1 to AS2AS2, causing the quantity of output supplied at a price level of 100 to rise from $200 billion to $250 billion. The following table lists several determinants of short-run aggregate supply. Complete the table by selecting the changes in each scenario necessary to increase short-run aggregate supply. Change Necessary to Increase AS Technology (DECLINES or IMPROVES) Human capital (IMPROVES or DECLINES) Inflation expectations (HIGHER or LOWER)arrow_forward
- Discuss the various factors affect aggregate supply curve shift.arrow_forwardThe 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 25trillion. At some point, the economy experiences a decrease in wage rates. Adjust the following graph to show the effect of a decrease in wage rates on the economy. Price Level 0 5 10 I | 1 15 20 25 30 35 Real GDP (Trillions Dollars) SRAS AD 40 45 50 AD SRASarrow_forwardAre the determinants of aggregate demand the same things that apply to demand for an individual good?arrow_forward
- How did the decline in U.S. home prices in 2006–2008 affect aggregate demand?arrow_forward6. Why the aggregate supply curve slopes upward in the short run In the short run, the quantity of output that firms supply can deviate from the natural level of output if the actual price level in the economy deviates from the expected price level. Several theories explain how this might happen. For example, the sticky-price theory asserts that the output prices of some goods and services adjust slowly to changes in the price level. Suppose firms announce the prices for their products in advance, based on an expected price level of 100 for the coming year. Many of the firms sell their goods through catalogs and face high costs of reprinting if they change prices. The actual price level turns out to be 110. Faced with high menu costs, the firms that rely on catalog sales choose not to adjust their prices. Sales from catalogs will , and firms that rely on catalogs will respond by the quantity of output they supply. If enough firms face high costs of adjusting prices, the unexpected…arrow_forward
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