Question:The attached picture shows the aggregate demand/aggregate supply situation in the U.S. What is the value of actual GDP? What is the value of the GDP deflator? Assume that people and businesses become pessimistic about the future of the economy; how will this affect the graph above in the short run? (i.e., which curve(s) will shift, and in which direction?) After the short-run event in part b, what will happen to actual GDP? What will happen to the price level? After the short-run event in part b, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion). What long-run adjustments will be made in this economy as a result of the short-run changes in part c? How will the curve(s) shift in response to these long-run adjustments? After the long-run adjustments in part e, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion). Price level (GDPDeflator)1401301201101009012141618▬▬▬▬▬▬20Real GDP22242628AD-SRASLRAS

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Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter11: Gross Domestic Product

Section: Chapter Questions

Problem 4SQ

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The attached picture shows the aggregate demand/aggregate supply situation in the U.S.

What is the value of actual GDP? What is the value of the GDP deflator?
Assume that people and businesses become pessimistic about the future of the economy; how will this affect the graph above in the short run? (i.e., which curve(s) will shift, and in which direction?)
After the short-run event in part b, what will happen to actual GDP? What will happen to the price level?
After the short-run event in part b, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion).
What long-run adjustments will be made in this economy as a result of the short-run changes in part c? How will the curve(s) shift in response to these long-run adjustments?
After the long-run adjustments in part e, describe how the economy is doing in terms of the business cycle (i.e., recession, full employment, expansion).

Price level (GDP
Deflator)
140
130
120
110
100
90
12
14
16
18
▬▬▬▬▬▬
20
Real GDP
22
24
26
28
AD
-SRAS
LRAS

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