Question
In: Economics
What shifts the short run aggregate supply curve? What is the shape of the long run...
What shifts the short run aggregate supply curve?
What is the shape of the long run aggregate supply curve and why is it that way?
What does potential output mean and what is happening when the economy is at potential output?
Solutions
Expert Solution
1)The short-run aggregate supply shifts in relation to changes in price level and production. any factor that affects the production cost like taxes and subsides, price of labor (wages), and the price of raw materials can change the production cost and there by has the capacity to shift the shortrun aggregte supply curve to the left or the right.
2) the shape of the longrun aggregate supply curve is vertical at the full employment level of output and it is so because in the long run all the factors are fully employed and there is no scope for further increase in output so at that level it becomes vertical.
3)potential output means the highest level of production that can be sustained over the longrun. when the economy is at the potential output the aggregate supply curve becomes vertical and there is no scope for further increase in production and output so if demand increase in the economy then only the price level will increase.
Rahul Sunny answered 1 year agoRelated Solutions
1) In the long run, the short-run aggregate supply curve shifts to eliminate any existing output...
1) In the long run, the short-run aggregate supply curve shifts
to eliminate any existing output gaps. Depict the parallel shift of
the short-run aggregate supply curve that occurs in the long
run.
2) Following a reduction in consumer spending, in the long run,
what is the value of real GDP in this economy?
10. The long-run aggregate supply curve shifts right if
10. The long-run aggregate supply curve shifts right if a. Immigration from abroad increases b. The capital stock increases c. Technology advances d. All of the above are correct 11. Which of the following would cause prices to decrease and real GDP to increase in the short run? a. Short-run aggregate supply shifts right. b. Short-run aggregate supply shifts left. c. Aggregate demand shifts right. d. Aggregate demand shifts left. 12. Which of the following is not a reason the New York Federal Reserve Bank president always gets to vote at...
In the short run, an increase in government purchases, a. shifts the aggregate supply curve to...
In the short run, an increase in government purchases,
a. shifts the aggregate supply curve to the right
b. increases real GDP
c. shifts the aggregate demand curve to the left
d. decreases the price level
Which of the following shifts the short-run, but not the long-run, aggregate supply right?
56. Which of the following shifts the short-run, but not the long-run, aggregate supply right? A. a decrease in the price level B. a decrease in the expected price level C. a decrease in the capital stock D. a decrease in the savings rate 57. Which of the following would cause prices and real GDP to rise in the short run? A. Short-run aggregate supply shifts right. B. Short-run aggregate supply shifts left. C. Aggregate demand shifts right. D. Aggregate demand shifts left.
Draw a diagram with an aggregate demand curve, a short-run aggregate supply curve, and a long-run...
Draw a diagram with an aggregate demand curve, a short-run
aggregate supply curve, and a long-run aggregate supply curve, for
an economy facing a recessionary gap. a) If the government does not
intervene to close this gap, describe what will happen to this
economy over time. Illustrate with a diagram. b) Describe the
policies that the government could use to return the economy to
long-run macroeconomic equilibrium, when it is facing a
recessionary gap. Illustrate with a diagram. c) What...
Draw a diagram with an aggregate demand curve, a short-run aggregate supply curve, and a long-run...
Draw a diagram with an aggregate demand curve, a short-run
aggregate supply curve, and a long-run aggregate supply curve, for
an economy facing a recessionary gap. a) If the government does not
intervene to close this gap, describe what will happen to this
economy over time. Illustrate with a diagram. b) Describe the
policies that the government could use to return the economy to
long-run macroeconomic equilibrium, when it is facing a
recessionary gap. Illustrate with a diagram. c) What...
) Explain whether each of the following events shifts the short-run aggregate supply curve, the aggregate...
) Explain whether each of the following events shifts the
short-run aggregate supply curve, the aggregate demand curve, both,
or neither. For each event that does shift a curve draw a diagram
to illustrate the effect on the economy (you don’t have to send me
the graphs, but you should draw them on scratch paper for
practice).
Households decide to save a larger share of their income.
Florida orange groves suffer a prolonged period of
below-freezing temperatures.
Increased job opportunities...
a. What assumptions are made to justify the shape of the short-run aggregate supply curve; i.e.,...
a. What assumptions are made to justify the shape of the
short-run aggregate supply curve; i.e., that it is horizontal at a
given price level?
b. What assumptions are made to justify the shape of the
long-run aggregate supply curve; i.e., that it is vertical at a
full-employment level of output?
c. Recently, oil prices have been declining in the U.S. Oil
prices hovered around $100 per barrel during much of 2013 and 2014.
During 2015 until the present day,...
1. Explain why the long-run aggregate supply (LRAS) curve is vertical while the short-run aggregate supply...
1. Explain why the long-run aggregate supply (LRAS)
curve is vertical while the short-run aggregate supply (SRAS) curve
slope upwards. List and discuss briefly the variables that could
cause the LRAS and the SRAS curves to shift. For each variable,
identify whether an increase in that variable will cause the curves
(LRAS and SRAS curves) to shift to the right or to the left.
2. What are the main roles of the Reserve Bank of
Australia (RBA)? How does the...
Describe and explain the shape of the short run aggregate supply curve along the Keynesian, intermediate...
Describe and explain the shape of the short run aggregate supply
curve along the Keynesian, intermediate and neoclassical zones.
Identify the zone(s) where unemployment should be the focus and
where inflation should be the focus.
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