For each of the following events, use the AD/AS model of the macroeconomy to sho

Question

For each of the following events, use the AD/AS model of the macroeconomy to show the short-run impacts of the change. What will be the impact on the average price level and real output? Be sure to label your diagram completely and briefly explain why any curves are shifting.

a. An increase in interest rates.

b. CNN Money reports an all time high in the Dow Jones Industrial Average.

c. Employer-provided health insurance costs decrease with new legislation.

d. A large hurricane in the Gulf of Mexico shuts down major oil refineries.

Explanation / Answer

a. AD curve shifts to the right increasing price level and GDP

b AD curve moves to the right increasing price level and GDP

c) SRAS curve moves to the right, increasing GDP and reducing price level

d) SRAS curve moves to the left decreasing GDP and increasing price level

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.