- Use The As Ad Model Below To Answer The Following Questions In Each Case Assume The Economy Starts In Long And Short 1 (57.57 KiB) Viewed 13 times
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Use the AS-AD model below to answer the following questions. In each case, assume the economy starts in long- and short-run equilibrium. The Macroeconomy in long- and short-run equilibrium LRAS SRAS K AD Real GDP (Y) Price level (base = 100) 100
Suppose a revolution in Iran results in a significant reduction in the world's supply of oil. a. Drag the appropriate line in the correct direction to show the short-run effect on the AS-AD model. This will: O increase output and lower the price level. reduce output and raise the price level. O reduce output and lower the price level. O increase output and raise the price level. b. Suppose the government takes no action to help the economy. Eventually, the price level (Click to select) ✓and output (Click to select) c. Suppose, instead, the government decides to take action to help the economy. The government can recommend: doing nothing. O raising taxes and/or raising spending. O cutting taxes and/or cutting spending. cutting taxes and/or raising spending. O raising taxes and/or cutting spending. d. If Canadian government makes the appropriate policy response, what happens to price levels and output in the long run. In the long run, the price level (Click to select) ✓and output (Click to select)