Consider an economy that is initially in long-run equilibrium. Assume that the long- run aggregate supply curve is vertical at Y = 3,000 while the short-run aggregate supply curve is horizontal at P = 1.0. The aggregate demand curve is Y= 2(M/P) and M = 1500. Suppose that a supply shock affects the economy in such a way that the price level doubles. Then, the short-run level of output becomes: 1500 3000 1235 1425

Consider an economy that is initially in long-run equilibrium. Assume that the long- run aggregate supply curve is vertical at Y = 3,000 while the short-run aggregate supply curve is horizontal at P = 1.0. The aggregate demand curve is Y= 2(M/P) and M = 1500. Suppose that a supply shock affects the economy in such a way that the price level doubles. Then, the short-run level of output becomes: 1500 3000 1235 1425

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter14: Aggregate Demand And Supply

Section14.A: The Self Correcting Aggregate Demand And Supply Model

Problem 19SQ

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