Suppose firms become very optimistic about future business conditions and invest heavily in new capital equipment. a. Draw an aggregate-demand/aggregate-supply diagram to show the short-run effect of this optimism on the economy. Label the new levels of prices and real output. Explain in words why the aggregate quantity of output supplied changes. b. Now use the diagram from part (a) to show the new long-run equilibrium of the economy. (For now, assume there is no change in the long run aggregate-supply curve.) Explain in words why the aggregate quantity of output demanded changes between the short run and the long run. c. How might the investment boom affect the long run aggregate-supply curve? Explain

Q: Refer to the diagram. The initial aggregate demand curve is AD1 and the initial aggregate supply…

A: cost push inflation influenced to the production cost of the firm which affects the output level .…

Q: Solve the attachment.

A: The long-run aggregate supply represents the potential output an economy is capable of achieving…

Q: Suppose firms become very optimistic about future business conditions and invest heavily in new…

A: Aggregate supply: It is the total inventory of merchandise and enterprises that organizations in a…

Q: Assuming Aggregate Demand and Aggregate Supply are initially at ADo and ASo respectively, which of…

A: The aggregate demand curve shows the total demand for all the finished goods and services in an…

Q: Suppose the aggregate demand and short-run aggregate supply schedules for an economy whose potential…

A: The short-run equilibrium level of real GDP occurs at the intersection point of SRAS and AD. i.e.,…

Q: O Assume that the United States economy is currently in long-run equilibrium. a) Draw a correctly…

A: Economy is already at full employment level . Under this situation where natural rate of…

Q: The table shows the aggregate demand and short-run aggregate supply schedules of Chamber Island in…

A: The potential GDP is at $510  billion. This implies that equilibrium price is $110.  When exports…

Q: What would be the effect of an unexpected increase in the price of oil on a graph showing aggregate…

A: In an economy, aggregate demand and aggregate supply curves are the graphical representation of the…

Q: Please answer question 4 1.Draw Aggregate Demand, Short Run Aggregate Supply, and Long Run…

A: Meaning of Aggregate Demand and Aggregate Supply: The term aggregate demand refers to the…

Q: An economy attained a long-run equilibrium at point A. How does the price adjust in the long run…

A: Over the long run, economy is at the natural rate of output.  Economy might move above the natural…

Q: The table below illustrates the aggregate demand and aggregate supply schedules of country A: Price…

A: Equilibrium in the market occurs at the intersection of aggregate demand and aggregate supply curves

Q: Suppose firms become very optimistic about future business conditions and invest heavily in new…

A: If firms become very optimistic about future business conditions and invest heavily in new capital…

Q: real GDP Q Figure C Figure D P level 60 P level 60 ASo LRAS LRAS 50 50 ASo 40 40 30 30 20 20 AD1 10…

A: In an economy, the concept of self-correction system of the market is given by the classical…

Q: Suppose a country's potential level of output is $90 billion. A decrease in total spending causes…

A: In the short run, output can differ from potential level of output as wages and prices are fully…

Q: Assume that Canada is initially in long run equilibrium. Discuss how each of the following four…

A: Hi student, Thanks for posting the question. As per the guideline, we are pr0viding the answer for…

Q: LRAS Price level SRAS2 SRAS, P3 C B P2 A P, AD2 AD1 Real GDP GDP, GDP,

A: since you have asked a multipart question and according to our policy we can only solve the first 3…

Q: Question 1 is reprinted for your convenience. 1. Assume that a country's economy is in long-run…

A: Answer: (b). If the demand for equipment decreases then the investment level in the economy will…

Q: Coronavirus pandemic and resultant shutdown measures to contain it have plunged the economies around…

A: There can be a demand-side shock- that is a global economic down will lead to a fall in the growth…

Q: Suppose the aggregate demand (AD) and short-run aggregate supply (AS) schedules for an economy whose…

A: Equilbrium occurs at the intersection point of AD and AS.  An increase in aggregate demand shifts…

Q: Assume that Canada is initially in long run equilibrium with price level of P1 and GDP of Y1.…

A: Hi, thank you for the question. “Hey, since there are multiple sub-parts  posted, we will answer the…

Q: Assume that (a) the price level is flexible upward but not downward and (b) the economy is currently…

A: Answer - Given in the question - Assume that (a) the price level is flexible upward but not downward…

Q: In answering the question, you should emphasize the line of reasoning that generated your results;…

A:

Q: Assume that the long-run aggregate supply curve is vertical at Y = 3.000 while the short-run…

A: Y=3000 Short run aggregate supply curve is horizontal at P= 1.0 Aggregate demand curve is; Y=2MP M=…

Q: In the following figure, an economy is currently in short-run equilibrium at point a. What is likely…

A: SRAS is used to mention short-term aggregate supply, and LRAS is used to mention long-term aggregate…

Q: Suppose that firms become very pessimistic about future business conditions and cut heavily on…

A: Economics starts at E's long-term equilibrium. The balance level of GDP Qf and the equilibrium price…

Q: 26. Assuming Aggregate Demand and Aggregate Supply are initially at ADo and ASo respectively, which…

A: Given is that aggregate Demand and Aggregate Supply are initially at ADo and ASo respectively, so…

Q: Which of the following shifts the short-run, but not the long-run, aggregate supply right? a…

A: Note:- Since we can only answer one question at a time, we'll answer the first one. Please repost…

Q: In 2004, the economy of Minitown had an aggregate demand and aggregate supply according to the…

A: The equilibrium is a state in which economic forces like supply and demand are balanced and the…

Q: uestion 27   The slope of a long-run aggregate supply curve is   vertical, because full-employment…

A: “Since you have asked multiple question, we will solve the first question for you. If you want any…

Q: 3. Assume the aggregate demand curve is given by Y 11.5 – 0.6n and the aggregate supply curve by t =…

A: Answer -   Inflation : - It is the increase in the price level of goods in a interval of time is…

Q: Suppose an economy is in long-run equilibrium.a.Use the model of aggregate demand and aggregate…

A: (a) The aggregate demand curve represents the relationship between the price level prevailing in the…

Q: Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly…

A: If the government and the Federal Reserve take no policy action in response to the recession - The…

Q: Suppose that the U.S. economy is at full employment when strong economic growth in Asia increases…

A: Changes in price level and real GDP can be understood easily by LRAS SRAS AD model (AS AD model).

Q: Economics Question

A: A short-run market equilibrium is when Aae intersects with AS and that can be above, below, or equal…

Q: Why does the short-run aggregate supply curve slope upward to the right? If the prices of both (a)…

A: Aggregate supply is the total amount of services and commodities that firms in an economic plan to…

Q: Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as…

A:

Q: Assume that the long-run aggregate supply curve is vertical at Y = 3,000 while the short-run…

A: A supply shock is an economic event that leads to a sudden increase or decrease in the supply of…

Q: Suppose Canada's economy is in a long-run equilibrium with real GDP equal to potential output. Now…

A: The correct solution is option b.

Q: QUESTION 4 Chapter 14 Suppose economy is in long run equilibrium. [Only one diagram is required for…

A: Since you have asked multiple questions, and according to policy we can solve only 1 question, and…

Q: Suppose the economy is producing at its potential output. Now suppose that consumers and businesses…

A: We are going to discuss the effect of negative outlook on the level of output to answer this…

Q: QUESTION 5 a. Suppose that some kind of significant economic event has occurred, and y ou learn that…

A: We are going to analyze the mechanism of AD-AS curves to answer this question.

Q: Assume that aggregate demand is unaffected by the gas tax holiday. After the economy has fully…

A: Due to the gas tax holiday, in the longrun, the aggregate demand curve will not be affected and a…

Q: Assume that the long-run aggregate supply curve is vertical at Y = 3.000 while the short-run…

A: Given values: Y = 3000 P = 1.0 Aggregate demand curve, Y = 2M/PM = 1500

Q: In answering the question, you should emphasize the line of reasoning that generated your results;…

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and…

Q: Starting at long run equilibrium, ceteris paribus, an increase in the costs of widely used factors…

A: Cost of production is a non price determinant for aggregate supply. Changes in the cost of…