The following graph shows several shifts in the short-run aggregate supply (AS)

Question

The following graph shows several shifts in the short-run aggregate supply (AS) and aggregate demand (AD)for a hypothetical economy. Initially, the expected price level of 90 us equal to the actual price level, and the economy is in long-run equilibrium at its natural rate of output, $80 billion. Note that this long-run equilibrium occurs at the intersection of AD1 and AS1, point T. Use the graph to identify the path of price level and output movements that occur in response to the following events. Suppose war in the world's main oil-producing region sharply reduces the world oil supply causing oil prices to rise and increasing the costs of producing goods and services in this economy. The increase in production costs causes a shift from to , and move the economy from point T to point? In the short run. (for simplicity, ignore any possible impact of the higher oil prices on the natural rate of output.) The short-run economic outcome resulting from the increase in production costs is known as

Explanation / Answer

I will list the answers in order with their blanks...hope this helps shift form AS1 to AS2 and is now at U. Stagflation X upward 110 80 billion

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