   Chapter 8, Problem 3WNG

Chapter
Section
Textbook Problem

Diagrammatically represent each of the following, and identify its short-run effect on Real GDP and the price level: a. An increase in SRAS that is greater than the increase in AD b. A decrease in AD that is greater than the increase in SRAS c. An increase in SRAS that is less than the increase in AD

(a)

To determine

Estimate the short-run effect on real GDP and the price level.

Explanation

An increase in the short-run aggregate supply (SRAS) curve is greater than the increase in aggregate demand:

Figure-1:

Figure-1 shows that the short-run aggregate supply (SRAS curve is greater than the increase in aggregate demand:

In the above figure, the vertical axis measures the price level and the horizontal axis represents the real GDP...

(b)

To determine

A decrease in the aggregate short-run aggregate supply (SRAS curve is greater than the increase in SRAS:

(c)

To determine

An increase in the short-run aggregate supply (SRAS curve is less than the increase in aggregate demand:

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