In the short run, the increase in foreign spending on domestic goods associated with expansion abroad causes the price level totheprice level people expected and the quantity of output tothe natural level of output. The economic prosperity abroad will cause theunemployment rate tothe natural rate of unemployment in the short run.Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion,before the increase in foreign spending on domestic goods associated with expansion abroad.During the transition from the short run to the long run, price-level expectations willand thecurve will shift to the The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion.Suppose the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services toincrease.Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prosperityabroad.240AS200AD160AS12080AD4020040060080010001200PRICE LEVEL

Aggregate demand refers to the expected amount received from the market from the sales proceedings…

The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prosperity abroad. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 PRICE LEVEL

The following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion. Suppose the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prosperity abroad. 240 AS 200 AD 160 AS 120 80 AD 40 200 400 600 800 1000 1200 PRICE LEVEL

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 61P: Table 24.4 describes Santhers economy. Plot the AD/AS curves and identify the equilibrium. Would you...

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