quiz4summer2007

quiz4summer2007 - Economics 302 Summer 2007 Quiz #4 Name _...

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Name __________________________________ Summer 2007 Quiz #4 Student ID Number _______________________ The following quiz is worth a total of 2.5 points. If your work is sloppy or illegible points will be subtracted. 1. Suppose an economy is initially in both long run and short run equilibrium. Assume in the short run prices are completely sticky and in the long run prices are completely flexible. a. (.25 points) Draw a diagram illustrating this situation using the AD/AS model. In your diagram make sure you include the LRAS, the SRAS, the AD, and the initial equilibrium aggregate price level (P) and the initial equilibrium aggregate output level (Y). b. (.25 points) Suppose that this economy experiences a positive aggregate demand shock so that at every price level there is greater demand for goods and services. Draw a graph showing the new short run equilibrium (Y’, P’) for this situation. Label your graph clearly and completely. 1
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quiz4summer2007 - Economics 302 Summer 2007 Quiz #4 Name _...

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