I
a when the technology improves the short run aggregate
supply curve moves to the right.Because thecost of
paducticn decrease
Priceled 然 As'theoutput will be
A more than before
1
i A
TTiti.ge f output
b todemand
It would lead the aggregate
because the investment
move to left
is less than before
Pricelevel AS
恐 Len
Quantityofoutput
C demand moves to
This would result aggregate
oight because the government pending
increased
nicelevel AS
TAP
T
auti.gg cutps
d This would lead SR AS curve to move to
due the higher cot of production
left to
and the output would be less
As
Pricelevel AS
Bi
AD
Tantiagf output
e demand
This wouldoesult that the aggregate
because the consumer
moves to left
be lessthan before
spending would
Pricelevel As
1 毙
AD AD
ittanntiy ofoutput
f The weaker dollar makes imports moreexpensive
and experts cheaper andwould resultthat
demand move to the
aggregate right because
experts
of higher
Pricelevel AS
另
1_A_EADA Quautigofcutp.it
g Theaggregatedemand would move to the
because consumer pending would
right
be more than before
Pacelevel
AS
肖 息
AD
AD
Quantity
ofoutput
2
a
1 level
Price LRASSRA SRA .LT
昌
A
ADAD
i
TEuantiycfc.atput
ii Firms would employmore labor as the
increases.The A moves to B as
consumption
increases Because the theory of
Output
stickywage their wage does not in creuse
lower real wages.Overtime
resulting
wages wouldbe adjustedand SRASwould
left the point movesfran B to C
shift to
iii Aidnominal stay the same but
wages
the real wage decreases as pricelevel
increases Bto Ci Nominal wages would
rise to reach newequalibr.com returning
real wages to their original level
b
LRAS
i Pricelevel SRAS
SRAS
A
ice AD
AD
Quantityofoutput
ii A to Bi Firms would hire less workers Realwageswould be
due to less consumption
they
Thet higher withstickywage
would be less and the point A would
move to B on SRAS curve B to Ci
As is adjusted in long run the
wages
SRAS would move to the sight returning
B to C
boiam
equal pointfran
iii A to Bi Nominal wages would not change
due to stickness and the realwage would
increase as price level falls Bto C
Nominal wages would adjustdownwad
to bring real wages lower to its
original point
AS
CR
C Pricelevel SRA
RAS
À
c
AD
ofoutput
Quantity
ii
A to Bi Thereduction in production cost
would lead production to be more than
before The point would movefrom A to
B The SR As moves to the right since
the wages are dicky downwards
the real wagesgoesup Bto C As
nominalwages
eventually adjust to the new
price levels the SRAS may continueto
shift until reaching a new long run
equalibrium
iii A to Bi Nominal wages keep the
same
due to stickness but real wages
increase due to lowerprice Bto C
overtime nominal wages would adjust
downwards
3
G The news would make peopleto expect
highe inflation in the future
b If workers expect higher inflation
want to get higherwages
they may
labor contract They wouldexpect
in new
decrease
their real wages would
in the future
C Theprofitability woulddecrease
because higher nomind wage
would increase thecost of firms
to produce
d Higher production cost
would
lead S RAS curve to shift1ft
e The cutput woulddecrease
At everypricelevel a lower
quantity ofgoods and services
is supplied
The statement is true The actualprice
a
level change would result the
movement along the SRAS curve
because
would response to higherprices
firms y
increasing the supplyofgoods
However
RAS
an expectedincrease in pricelevel can shits
because
firms would preemptively raisethe
wages ofworkers leading a lowerquatury
of goods at eachpricelevel
b Thisis uncertain.If decrease ofoutput wascaused
by decrease in AD the economy may
experience
deflation it is adjusting.The mechanism
inflation or as
is through changes inthe interest rate and wages
the decrease is caused a decreasein SRAS
If by
The adgvetmeut may also brings with highinflation
and high unemployment Until wages and other costs adjust
downward allowing the SRASto move backto
the right
5 Factors includegovernment stimulus consumer
spending adjustments in business investment and
resilience in specificeconomic sectors
