Use the figure to answer the following questions. Assume that the economy initially is operating at price level 120 and real output level $870. This output level is the economy's potential (full-employment) level of output. Next, suppose that the price level rises from 120 to 130. 160 AS3 AS 2 150 AS₁ 140 130 120 110 100 90 810 830 850 870 890 910 930 950 Real output (dollars) Instructions: Enter your answers as a whole number. a. By how much will real output Increase in the short run? In the long run? b. Instead, now assume that the price level drops from 120 to 110. Assuming flexible product and resource prices, by how much will real output fall in the short run? In the long run? c. What is the long-run level of output at each of the three price levels shown? Price level

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter24: The Aggregate Demand/aggregate Supply Model
Section: Chapter Questions
Problem 61P: Table 24.4 describes Santhers economy. Plot the AD/AS curves and identify the equilibrium. Would you...
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Use the figure to answer the following questions. Assume that the economy initially is operating at price level 120 and real output level
$870. This output level is the economy's potential (full-employment) level of output. Next, suppose that the price level rises from 120 to
130.
160
150
AS AS₂
AS₁
140
130
120
110
100
90
810 830 850 870 890 910 930 950
Real output (dollars)
Instructions: Enter your answers as a whole number.
a. By how much will real output Increase in the short run?
In the long run?
$
b. Instead, now assume that the price level drops from 120 to 110. Assuming flexible product and resource prices, by how much will real
output fall in the short run?
In the long run?
c. What is the long-run level of output at each of the three price levels shown?
Price level
LA
$
Transcribed Image Text:Use the figure to answer the following questions. Assume that the economy initially is operating at price level 120 and real output level $870. This output level is the economy's potential (full-employment) level of output. Next, suppose that the price level rises from 120 to 130. 160 150 AS AS₂ AS₁ 140 130 120 110 100 90 810 830 850 870 890 910 930 950 Real output (dollars) Instructions: Enter your answers as a whole number. a. By how much will real output Increase in the short run? In the long run? $ b. Instead, now assume that the price level drops from 120 to 110. Assuming flexible product and resource prices, by how much will real output fall in the short run? In the long run? c. What is the long-run level of output at each of the three price levels shown? Price level LA $
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