For the following economic change, first explain with words the short-run adjustments you would expect to see in aggregate supply and aggregate demand, indicating the type of short- run gap created. Second, explain with words what will change in the adjustment process from short-run to long-run. Assume we start at equilibrium, and that potential GDP is unaffected by these changes. New political instability in major oil-producing regions increases the price of imported oil (Canada is a net oil-importing country). In the short run, The AS curve will The AD curve will GDP will The price level will A/an output gap is created. In the long run, Wages and other factor prices will The AS curve will GDP will The price level will shifts to the left shifts to the right remain unchanged increase decrease remain unchanged inflationary recessionary
For the following economic change, first explain with words the short-run adjustments you would expect to see in aggregate supply and aggregate demand, indicating the type of short- run gap created. Second, explain with words what will change in the adjustment process from short-run to long-run. Assume we start at equilibrium, and that potential GDP is unaffected by these changes. New political instability in major oil-producing regions increases the price of imported oil (Canada is a net oil-importing country). In the short run, The AS curve will The AD curve will GDP will The price level will A/an output gap is created. In the long run, Wages and other factor prices will The AS curve will GDP will The price level will shifts to the left shifts to the right remain unchanged increase decrease remain unchanged inflationary recessionary
Chapter20: Aggregate Demand And Supply
Section: Chapter Questions
Problem 8SQP
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Transcribed Image Text:For the following economic change, first explain with words the short-run adjustments you would expect to see in aggregate supply and aggregate demand, indicating the type of short-
run gap created. Second, explain with words what will change in the adjustment process from short-run to long-run. Assume we start at equilibrium, and that potential GDP
is unaffected by these changes.
New political instability in major oil-producing regions increases the price of imported oil (Canada is a net oil-importing country).
In the short run,
The AS curve will
The AD curve will
GDP will
The price level will
A/an
output gap is created.
In the long run,
Wages and other factor prices will
The AS curve will
GDP will
The price level will
shifts to the left
shifts to the right | remain unchanged
increase
decrease
remain unchanged
inflationary recessionary
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