The following graph shows several shifts in the short-run aggregate supply (aS)

Question

The following graph shows several shifts in the short-run aggregate supply (aS) and aggregate demand (aD) for a hypothetical economy. Initially, the expected price level of 90 Is equal to the actual price level, and the economy Is In long-run equilibrium at its natural rate of output, $80 billion. Note that this long-run equilibrium occurs at the Intersection of aD1 and aS1, point a. Use the graph to identify the path of price level and output movements that occur in response to the following events. If the Federal Reserve increases money supply, the short-run equilibrium would be at B C E F None of above In the previous question, the long-run equilibrium would be at B C E F None of above If the government increases taxes, the short-run equilibrium would be at B D E F None of above In the previous question, the long-run equilibrium would be at B D E F None of above If the price level suddenly rises, the short-run equilibrium would be at a B D E None of above In the previous question, the long-run equilibrium would be at a B D E None of above

Explanation / Answer

12)a-B 13)c-E 14)c-E 15)b-D 16)b-B 17)d-E

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