UNIVERSITY OF TECHNOLOGY, JAMAICA SCHOOL OF BUSINESS ADMINISTRATION ECO 3002: INTERMEDIATE MACROECONOMICS WORK SHEET #5 Aggregate Demand and Supply 1. Explain why the long-run aggregate supply curve is vertical and the short-run aggregate supply curve is horizontal. 2. The length of time between the short run and long run varies across sectors of the economy. For the following industries, estimate the time it takes to reach the "long run" based upon your knowledge of how quickly prices in this industry change in response to the given shock. Describe the rational underlying each of your estimates. a. gasoline prices after an announcement of a reduction in OPEC production b. banana prices after a severe hurricane destroys bananas in St. Mary c . Suzuki car prices after auto workers receive an increase in wages 3. Suppose there was a huge drought in the Jamaica which cut farm production in half for one year. a.
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