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The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $300 billion. Suppose a stock market boom increases household wealth and causes consumers to spend more. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. PRICE LEVEL 240 200 160 120 80 40 AS AD AD AS

The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $300 billion. Suppose a stock market boom increases household wealth and causes consumers to spend more. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. PRICE LEVEL 240 200 160 120 80 40 AS AD AD AS

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model
Section: Chapter Questions
Problem 7CQ
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The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $300 billion. Suppose a stock market boom increases household wealth and causes consumers to spend more. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. PRICE LEVEL 240 200 160 120 80 40 AS AD AD D AS ?
Transcribed Image Text:The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a natural output level of $300 billion. Suppose a stock market boom increases household wealth and causes consumers to spend more. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the stock market boom. PRICE LEVEL 240 200 160 120 80 40 AS AD AD D AS ?
the price In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to level people expected and the quantity of output to the natural level of output. The stock market boom will cause the unemployment the natural rate of unemployment in the short run. rate to Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of $300 billion, prior to the increase in consumption spending associated with the stock market expansion. Along the transition from the short run to the long run, price-level expectations will the curve will shift to the Using the graph, illustrate the long-run impact of the stock market boom by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve in the appropriate directions. EVEL 240 200 160 AS AD D AS and ?
Transcribed Image Text:the price In the short run, the increase in consumption spending associated with the stock market expansion causes the price level to level people expected and the quantity of output to the natural level of output. The stock market boom will cause the unemployment the natural rate of unemployment in the short run. rate to Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of $300 billion, prior to the increase in consumption spending associated with the stock market expansion. Along the transition from the short run to the long run, price-level expectations will the curve will shift to the Using the graph, illustrate the long-run impact of the stock market boom by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve in the appropriate directions. EVEL 240 200 160 AS AD D AS and ?
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