The economy begins in long-run equilibrium. Then one day, the president appoints a new Fed chair, who is well known for holding the view that inflation is not a major problem for an economy. Note: You will not be graded on any changes you make to the following graph, but you may use it to help you understand the scenario described. Price Level LRAS Quantity of Output Aggregate Supply Aggregate Demand Aggregate Demand Aggregate Supply LRAS Which of the following statements accurately describes what would happen as a result of this news? Check all that apply People would expect the price level to rise. The nominal wage that workers and firms agree to in their new labor contracts would be lower than it would be otherwise. The profitability of producing goods and services at any given price level would increase. The short-run aggregate-supply curve would shift to the left. If aggregate demand is held constant, the shift in the aggregate-supply curve will cause the price level to and the quantity of output produced to
The economy begins in long-run equilibrium. Then one day, the president appoints a new Fed chair, who is well known for holding the view that inflation is not a major problem for an economy. Note: You will not be graded on any changes you make to the following graph, but you may use it to help you understand the scenario described. Price Level LRAS Quantity of Output Aggregate Supply Aggregate Demand Aggregate Demand Aggregate Supply LRAS Which of the following statements accurately describes what would happen as a result of this news? Check all that apply People would expect the price level to rise. The nominal wage that workers and firms agree to in their new labor contracts would be lower than it would be otherwise. The profitability of producing goods and services at any given price level would increase. The short-run aggregate-supply curve would shift to the left. If aggregate demand is held constant, the shift in the aggregate-supply curve will cause the price level to and the quantity of output produced to
Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply
Section: Chapter Questions
Problem 19E
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Transcribed Image Text:The economy begins in long-run equilibrium. Then one day, the president appoints a new Fed chair, who is well known for holding the view that
inflation is not a major problem for an economy.
Note: You will not be graded on any changes you make to the following graph, but you may use it to help you understand the scenario described.
Price Level
LRAS
Quantity of Output
Aggregate Supply
Aggregate Demand
Aggregate Demand
Aggregate Supply
LRAS
Which of the following statements accurately describes what would happen as a result of this news? Check all that apply
People would expect the price level to rise.
The nominal wage that workers and firms agree to in their new labor contracts would be lower than it would be otherwise.
The profitability of producing goods and services at any given price level would increase.
The short-run aggregate-supply curve would shift to the left.
If aggregate demand is held constant, the shift in the aggregate-supply curve will cause the price level to and the quantity of output produced to
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