Economics 1.odt - Explain how the short-run and long-run equilibrium levels of output and the price level were affected by the Blue Eagle program using

Economics 1.odt - Explain how the short-run and long-run...

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Explain how the short-run and long-run equilibrium levels of output and the price level were affected by the Blue Eagle program, using AS-AD analysis. Illustrate how this works by drawing a diagram of LRAS (long-run aggregate supply), SRAS (short-run aggregate supply) and AD (aggregate demand) on a piece of paper, using “point A,” “point B,” etc., like the graphs in the text book. Show the impact of passage of the legislation behind the Blue Eagle program on the price level and GDP. Based on the Blue Eagle Program Higher wages would increase labor costs for businesses
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Unformatted text preview: that employ workers. That would decrease the supply of the product. An increase in wages will raise prices. Aggregate supply from SRAS1 to SRAs2 decreases (b). Prices levels are higher, for P1 toP2 but output is even lower for Y1 toY2(3). If the NRA supply restrictions become permanent, potential output would decline as well (c) Price Level (P) LRAS SRAS 2 SRAS 1 point B P2 P1 Point A AD Y2 Y1 Real GDP (Y)...
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  • Winter '12
  • JamesFletcher

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