Subpart (a):
The graphical illustration for the changes in
Subpart (a):
Explanation of Solution
Figure 1 shows the shift in the supply curve of labor force.
In Figure 1, the vertical axis measures the price level and the horizontal axis measures the aggregate output. The upward sloping curves AS0 and AS1 are aggregate supply curves. The decrease in the size of labor force reduces the supply of labor in the market. It shifts the
Concept introduction:
Aggregate Supply (AS): Aggregate supply refers to the total value of the goods and the services available for purchase at a particular price in a given period of time.
Subpart (b):
The graphical illustration for the changes in aggregate supply.
Subpart (b):
Explanation of Solution
Figure 2 shows the changes in the aggregate supply curve of capital.
In Figure 2, the vertical axis measures the price level and the horizontal axis measures the aggregate output. The upward sloping curves AS0 and AS1 are aggregate supply curves. The increase in available capital increases the supply of capital in the market. It shifts the supply curve from AS1 to AS0.
Concept introduction:
Aggregate Supply (AS): Aggregate supply refers to the total value of the goods and services available for purchase at a particular price in a given period of time.
Subpart (c):
The graphical illustration for the changes in aggregate supply.
Subpart (c):
Explanation of Solution
Figure 3 shows the changes in aggregate supply curve.
In Figure 3, the vertical axis measures the price level and the horizontal axis measures the aggregate output. The upward sloping curves AS0 and AS1 are aggregate supply curves. An increase in the productivity, as a result of a technological change, shifts the aggregate supply curve to the right (from AS1 to AS0).
Concept introduction:
Aggregate Supply (AS): Aggregate supply refers to the total value of the goods and services available for purchase at a particular price in a given period of time.
Subpart (d):
The graphical illustration for the changes in aggregate supply curve.
Subpart (d):
Explanation of Solution
Figure 4 shows the changes in aggregate supply curve.
In Figure 4, the vertical axis measures the price level and the horizontal axis measures the aggregate output. The upward sloping curves AS0 and AS1 are aggregate supply curves. The increase in the price of oil increases the supply of oil in the market. It shifts the aggregate supply curve rightward (from AS1 to AS0).
Concept introduction:
Aggregate Supply (AS): Aggregate supply refers to the total value of the goods and services available for purchase at a particular price in a given period of time.
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Chapter 26 Solutions
Principles of Economics (12th Edition)
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- The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table shows. Price Level: AD/AS Price Level AD AS 100 800 300 120 700 425 140 600 600 160 500 670 180 400 720 Plot the AD/AS diagram (You don't have to submit the plot, but I recommend doing it as it will help you with this problem). Identify the equilibrium. Blank #1 - Equilibrium Price Level Blank #2 - Equilibrium GDP Blank #3 - Would you expect unemployment in this economy to be relatively high or low? Blank #4 - Would you expect concern about inflation in this economy to be relatively high or low? Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Blank #5 - What is the new equilibrium GDP? Blank #6 - What is the new equilibrium Price Level? How will the shift in AD affect (answer is rise or fall)..arrow_forwardThe imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table shows. Price Level: AD/AS Price Level AD AS 100 800 300 120 700 425 140 600 600 160 500 670 180 400 720 Plot the AD/AS diagram (You don't have to submit the plot, but I recommend doing it as it will help you with this problem). Identify the equilibrium. Blank #1 - Equilibrium Price Level Blank #2 - Equilibrium GDP Blank #3 - Would you expect unemployment in this economy to be relatively high or low? Blank #4 - Would you expect concern about inflation in this economy to be relatively high or low? Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Blank #5 - What is the new equilibrium GDP? Blank #6 - What is the new equilibrium Price Level? How will the shift in AD affect (answer is rise or fall)... Blank #7 - the original output? Blank #8 - the price…arrow_forwardWhich of the following is not a component of the aggregate demand curve? a.Government spending(G) b. Investment (I) c. Consumption (C) d. net exports (X-M) e. Savingsarrow_forward
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