Need help fast End of Chapter 2.9QuesA student was asked to draw an aggregate demand and aggregate supply graph to illustrate the effect of anincrease in aggregate supply. The student drew the following graph:SRAS,The student explained the graph as follows:"An increase in aggregate supply causes a shift from SRAS, to SRAS, Because this shift in the aggregatesupply curve results in a lower price level, consumption, investment, and net exports will increase. This changecauses the aggregate demand curve to shift to the right from AD, to AD, We know that real GDP will increase,but we can't be sure whether the price level will rise or fall because that depends on whether the aggregatesupply curve or the aggregate demand curve has shifted farther to the right. I assume that aggregate supplyshifts out farther than aggregate demand, so I show the final price level, P3, as being lower than the initial pricelevel,P.P,SRAS,P3Which of the following is a correct statement about the student's analysis?P2AD2O A. The student's analysis is correct.AD,O B. The student is incorrect because the price level should rise when SRAS increases.O C. The student is incorrect because the aggregate demand curve does not shift because of the price levelchange.Real GDP, YO D. The student is incorrect because the aggregate demand curve should decrease, not increase.Click to select your answer and then click Check AnswerClear AllCheck AnswerAll parts showing20中ENGa15/04/O Type here to searchprt scdeletehome米%backspace244.%2378

Students analysis is correct,because with increase in SRAS,price level decreases.

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Economics

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Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter8: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 1WNG

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