LRAS SRAS Problem Seven: AD AD2 AD Assume the economy is in long run equilibrium
ID: 1144019 • Letter: L
Question
LRAS SRAS Problem Seven: AD AD2 AD Assume the economy is in long run equilibrium at Point B. If confidence decreases, where would the economy move in the short run? What would GDP growth, the unemployment rate, the CPl, the PPl, and capacity utilization be like? If no intervention happens, where would the economy be in long run equilibrium? Assume again that the economy is in long run equilibrium at Point B. Give three examples of changes (also known as shocks) that could shift the short term equilibrium to E. 1. 2. 3.Explanation / Answer
D
C
Some shocks are normalisation of environment after natural disaster, New information that shows more consumption increases health and prevents diseases like cancer , change in tax rates,peaceful conditions after war, a large increase in wealth
Natural disaster destroys nations infrastructure - agreggate supply will shift upwards
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