Consider an economy which is in the long-run and short-run
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.
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.
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