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Unformatted text preview: the short run. f. The situation described in part (e) results in a (n) __no_____ gap equal to __0_____. 3.1 1. Increases in technology 2. Increases in productivity 3. Better educated workers An increase in AD does not affect potential output, exhibit four in the book on page 161 is an illustration of potential output and aggregate demand. 3.2 An adverse supply shock would be a war in the Middle East doubling the price of oil. The higher prices would cause supply curves to move to the left, raising the price and decreasing the quantity traded. Exhibit 7 on page 166 in the book is an illustration of adverse supply shock. A beneficial one would be the doubling of the Florida orange crop due to favorable weather. The supply curve for things like oranges and orange juice would move to the right, lowering prices and increasing quantity traded. Exhibit 6 page 165 in the book is an example of supply shock....
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- Spring '12