Draw a graph showing an economy experiencing a recessionary gap. A shortened wor

Question

Draw a graph showing an economy experiencing a recessionary gap. A shortened workweek is introduced. The effect on the SRAS will be a shift to the The shortened workweek is followed by a cut in workers' pay, which has a slightly stronger impact on the SRAS. The effect on the SRAS will be a shift on aggregat theAfter completing your shifts, find the final long-run macroeconomic equilibrium point. Comparing it with the original equilibrium point, you found that RGDP and the Price Level to the .. The effect on aggregate demand due to the cut in workers' pay will be a shift to left; right; left; price level fell, but effect on RGDP is undermined left; left; left; price level rose, but effect on RGDP is undermined right; right; left; price level fell, and RGDP fell left; right; right; price level rose, and RGDP fell

Explanation / Answer

The answer is A -) Left ; Right ; Left ; price level fell , but effect on RGDP is undetermined.

becasue, A shortened workweek is introduced, which reduce the short run aggregate supply curve . and it will shift to the left. but the shortened workweek is followed by a cut in a worker's pay which increase to labor productivity to earn more and thus production increase and it will shift the SRAS curve to the right. due to cut in worker's pay, the income decrease and thus aggregate demand curve and AD shift to the left.

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