(a) (b) (c) AS(P100) AS(P125) AS(P75) P Q P Q P Q 125 $560 125 $500...
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AS(P100) |
AS(P125) |
AS(P75) |
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P |
Q |
P |
Q |
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125 |
$560 |
125 |
$500 |
125 |
$620 |
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100 |
500 |
100 |
440 |
100 |
560 |
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75 |
440 |
75 |
380 |
75 |
500 |
Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are flexible both upward and downward. Refer to the accompanying short-run aggregate supply schedules. If the price level unexpectedly declines from 100 to 75, the level of real output, in the long run, will
Group of answer choices
rise from $500 to $560.
fall from $500 to $440.
fall from $560 to $500.
return to $500.
Homework Answers
Ans.- fall from 500 to 440
Since full employment output is 500 and price level is 100 it means we are talking about AS(P100) . In AS(P100) if price declines from 100 to 75 level of real output falls from 500 to 440.
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125
$500...
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