Question

Draw the appropriate curve shifts in response to the following scenarios. Label the new equilibrium points. Will the price level rise or fall? Will real GDP increase or decrease in the short run?

a. Incomes fall in a neighboring country. (Hint: What will be the effects of this on exports?)


b.Workers expect higher inflation in the future.

c. The government decides to increase purchases to stimulate the economy.

d. A new technology revolutionizes production throughout the economy.

Answer 1

Pending and possible answers?:

Answer 2

I agree with everytihng that you did in this problem. Looks correct to me.

Answer 3

For the last one, it should be the LAS shifting right since improvement in technology gives rise to more productivity which feeds into the LAS

Answer 4

Agree.