The following events have occurred at times in the history of the United States:

Question

The following events have occurred at times in the history of the United States: The world economy goes into an expansion ·S. businesses expect future profits to rise. The government increases its expenditures on goods and services in a time of war or increased international tension. 1. Explain for each event whether it changes shortO-run aggregate supply, long-run 2. Explain the separate effects of each event on U.S. read GDP and the price level, starting . Explain the combined effects of each event on U.S. read GDP and the price level, aggregate supply, aggregate demand, or some combination of them from a position of long-run equilibrium starting from a position of long-run equilibrium

Explanation / Answer

It changes both short run Aggregate supply and aggregate demand. Real GDP will rise and so will price level

B As s business expect profits to rise short run supply curve will rise. GDP will rise and so will prices

C due to increased expenditure short run supply will rise. Real GDP will rise and so will prices

3 Real GDP will rise and so will prices due to combined effect

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