Question

Consider an economy which is in the long-run and short-run equilibrium. Propose a factor that will...

Consider an economy which is in the long-run and short-run equilibrium.
Propose a factor that will lead to a decrease in the general price level and an increase in the real GDP at
the same time in the short run while the LRAS curve remains unchanged.
You should clearly state the factor, how the factor changes (increase or decrease) and explain how it
shifts the relevant curve in the P-Y space leading to a decrease in the general price level and an
increase in the real GDP at the same time in the short-run.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

short run aggregate supply curve affect by taxes,subsidy,price of labor,price of raw material all these factor shift SRAS change in quality and quantity of labor and capital affect both SRAS and LRAS.change in taxes affect SRAS and AD.

so, increase in subsidy is a factor which cause rightward shift in short run aggregate supply curve from SRAS to SRAS' as shown in diagram which leads to decrease in price level from P to P' and increase in real GDP from Q to Q' and does not affect long run aggregate supply curve in this economy's output is more than potential GDP.

please upvote if i'm able to help you it means a lot

thank you

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose that an economy is initially at the long-run and short-run equilibrium. In the next year,...
Suppose that an economy is initially at the long-run and short-run equilibrium. In the next year, we observe that the real GDP and the potential GDP remains the same but the price level has increased. Which curve(s) in the LRAS-SRAS-AD diagram must have shifted to generate the observation above? If any of the curves has shifted, state the direction of the shift, propose a factor that leads to the shift of the curve and state clearly whether the factor has...
Suppose the economy is in long-run equilibrium. In a short span of time, there is a...
Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage. In the short run, what would we expect to happen? Select one: a. the price level to fall, and real GDP to remain unchanged b. the price level to remain unchanged, and real GDP to fall c. the price level to fall, and the real GDP to rise the same d. the price level to rise, and real...
Suppose the economy is in long-run equilibrium. In a short span of time, there is an...
Suppose the economy is in long-run equilibrium. In a short span of time, there is an increase in the number of highly educated workers and an improvement in farming technologies related to growing corn. In the short run, we would expect the price level to rise and real GDP to fall. the price level to fall and real GDP to rise. the price level to fall and real GDP to fall. the price level and real GDP both to stay...
5- If an economy is in short-run equilibrium where the level of real GDP is less...
5- If an economy is in short-run equilibrium where the level of real GDP is less than potential output, then, in the long run, one will find: A-Nominal wages will rise and the SRAS curve will shift left bringing the economy back to its potential real GDP. B-Nominal wages will rise shifting the AD curve to the right and restoring real GDP to its potential level C-Nominal wages will fall and the SRAS curve will shift right bringing the economy...
Scenario 14-1 The economy is in long-run equilibrium. Suddenly, due to improved international relations and the...
Scenario 14-1 The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time. ____ 19.   Refer to the Scenario 14-1. In the short run, which of the following describes the changes that take place in the economy? a. Both the price level and real GDP rise. b. Both the price level and real GDP fall. c. The price...
Consider a hypothetical economy that is at a short run and long run equilibrium. Suppose that...
Consider a hypothetical economy that is at a short run and long run equilibrium. Suppose that in this economy, there is an adverse (i.e. negative) supply shock. Additionally, there is an increase in people’s expectations about future inflation. Considering the Phillips Curve, answer what will happen to: i)    The inflation rate. ii)    The unemployment rate. In the short-run for such an economy. Inflation will increase; unemployment will increase. Inflation will decrease; unemployment will decrease. Inflation will increase; unemployment will decrease....
ECO - 252 -- Macroeconomics 6. Imagine that in 2015 the economy is in long-run equilibrium....
ECO - 252 -- Macroeconomics 6. Imagine that in 2015 the economy is in long-run equilibrium. Firms suddenly become pessimistic about the future. Using the AD-AS model and assuming policymakers take no action, a. Which curve shifts and in which direction? b. In the short run, what happens to the price level and real GDP? c. What happens to the expected price level? d. What will happen to nominal wages? e. In the long run, what will happen to the...
3. An economy is initially at a long run equilibrium (GE). A. On the AD-AS graph,...
3. An economy is initially at a long run equilibrium (GE). A. On the AD-AS graph, show the AD, LRAS and SRAS curves/lines. Label this “A” B. The Central Bank (Federal Reserve) increases the money supply. Give one action the Fed can take to increase the money supply.       _________________________________ Show how this changes the AD-AS graph. Label the curve/line that shifts with a “2” and label the new equilibrium “B”       There is no additional policy action: C. Show...
Assume that the economy of Fruitland is a long-run equilibrium with full employment. In the short...
Assume that the economy of Fruitland is a long-run equilibrium with full employment. In the short run, nominal wages are fixed. (a) Assume that there is an increase in exports from Fruitland. Explain the effect of higher exports on the following in the short run:             (i) Real GDP (ii) Price Level (b) Based on your answer in part (a), what is the impact of higher exports on real wages in the short run? Explain.       (c) As a result of...
Favorable weather    a.    would cause the AS curve to shift leftward, thereby increasing both...
Favorable weather    a.    would cause the AS curve to shift leftward, thereby increasing both output and the price level    b.    would increase firms’ unit costs    c.    is an example of a negative supply shock    d.    is an example of a positive demand shock    e.    would lead to an increase in output and a decrease in the price level A negative supply shock    a.    decreases real GDP and increases...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT