Suppose firms become very optimistic about future business conditions and invest heavily in new capital equipment.
Show the short-run effect of this optimism on the aggregate-demand curve.
Aggregate DemandAggregate SupplyLRASPrice LevelQuantity of OutputAggregate Demand Aggregate Supply LRAS
Which of the following reasons could explain why the aggregate quantity of output supplied changes? Check all that apply.
Wages are not sticky.
The price level has risen.
Prices are sticky.
People have misperceptions about the price level.
On the previous graph, show what happens to the short-run aggregate-supply curve in the long run. (Note: For now, assume there is no change in the long-run aggregate-supply curve.)
The aggregate quantity of output demanded_____ between the short run and the long run because the price level______ .
The investment boom might cause the long-run aggregate-supply curve to_____ if it creates a larger capital stock in the future, which increases productivity and output. (fill in the blanks).