The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $300billion. Suppose households suddenly begin to spend less and save more in order to increase saving for retirement.Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the sharp increase insaving.PRICE LEVEL24020016012084000100200300400OUTPUT (Billions of dollars)ASAD500600ADASAIn the short run, the decrease in consumption spending associated with the increase in saving causes the price level toprice level people expected and the quantity of output tothe unemployment rate tothethe natural level of output. The sharp increase in saving will causethe natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $300billion, before the decrease in consumption spending associated with the increase in saving.During the transition from the short run to the long run, price-level expectations willcurve will shift to the .theNow show the long-run impact of the sharp increase in saving by shifting both the aggregate demand (AD) curve and the short-run aggregatesupply (AS) curve to the appropriate positions.PRICE LEVEL240200100120804000100400200 300OUTPUT (Billions of dollars)ASAD500600oAD1ASIn the long run, as a result of the sharp increase in saving, the price leveloutputthe natural level of output, and the unemployment rateand4the quantity ofthe natural rate of unemployment.

Money that is kept rather than spent can be used in the future. Savings also refers to the net…

Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the sharp increase in saving. PRICE LEVEL 240 200 160 120 8 40 0 100 200 300 400 OUTPUT (Billions of dollars) AS AD 500 600 AD -0- AS In the short run, the decrease in consumption spending associated with the increase in saving causes the price level to price level people expected and the quantity of output to the unemployment rate to the the natural level of output. The sharp increase in saving will cause the natural rate of unemployment in the short run.

Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the sharp increase in saving. PRICE LEVEL 240 200 160 120 8 40 0 100 200 300 400 OUTPUT (Billions of dollars) AS AD 500 600 AD -0- AS In the short run, the decrease in consumption spending associated with the increase in saving causes the price level to price level people expected and the quantity of output to the unemployment rate to the the natural level of output. The sharp increase in saving will cause the natural rate of unemployment in the short run.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter20: Aggregate Demand And Supply

Section: Chapter Questions

Problem 8SQP

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The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $300 billion. Suppose households suddenly begin to spend less and save more in order to increase saving for retirement. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the sharp increase in saving. 240 AS 200 AD 160 AS 120 80 AD 40 100 200 300 400 500 600 OUTPUT (Billions of dollars) In the short run, the decrease in consumption spending associated with the increase in saving causes the price level to the price level people expected and the quantity of output to the natural level of output. The sharp increase in saving will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $300 billion, before the decrease in consumption…
Along the transition from the short run to the long run, price-level expectations will curve will shift to the Using the graph, illustrate the long-run impact of the sharp increase in saving by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve in the appropriate directions. PRICE LEVEL 240 200 160 120 80 40 0 200 400 600 800 OUTPUT (Billions of dollars) AS AD 1000 1200 In the long run, due to the sharp increase in saving, the price level level of output, and the unemployment rate AD AS the natural rate. and the ? the quantity of output the natural
The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose a stock market boom increases household wealth and causes consumers to spend more. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 OUTPUT (Billions of dollars) In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to the price level people expected and the quantity of output to the natural level of output. The stock market boom will cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the increase in consumption spending associated with…
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