quanda33 - Chapter 33 1. For the following four cases,...

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Economics 1 Chapter 33 1. For the following four cases, trace the impact of each shock in the aggregate demand and aggregate supply model by answering the following three questions for each: What happens to prices and output in the short run? What happens to prices and output in the long run if the economy is allowed to adjust to long-run equilibrium on its own? If policy makers had intervened to move output back to the natural rate instead of allowing the economy to self-correct, in which direction should they have moved aggregate demand? a. aggregate demand shifts left Answer: Prices fall, output falls. Prices fall, output returns to the natural rate. Shift aggregate demand to the right. b. aggregate demand shifts right Answer: Prices rise, output rises. Prices rise, output returns to the natural rate. Shift aggregate demand to the left. c. short-run aggregate supply shifts left Answer: Prices rise, output falls. Price level returns to original value, output returns to the natural rate. Shift aggregate demand to the right. d. short-run aggregate supply shifts right Answer: Prices fall, output rises. Price level returns to original value, output returns to the natural rate. Shift aggregate demand to the left. 2. The following events have their initial impact on which of the following: aggregate demand, short-run aggregate supply, long-run aggregate supply, or both short-run and long-run aggregate supply? Do the curves shift to the right or left? a. The government repairs aging roads and bridges. Answer:
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quanda33 - Chapter 33 1. For the following four cases,...

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