5. Shifts of the aggregate supply curve Which of the following would properly be classified as a favorable supply shock? O The world price of oil increases rapidly without warning and is expected to remain at the new high level for many years, making it more expensive for all firms to produce goods and services. O The interest rate decreases, spurring investment spending. O A hurricane hits a major city, destroying factories, roads, airports, and homes. Because the city was a major port and transportation hub, goods and services need to be rerouted, increasing transportation costs for firms nationwide. O There is a technological improvement that allows firms to reduce their costs of production permanently. O There is an increase in government spending.The following graph shows the shortrun aggregate supply curve {SEAS} and longrun aggregate supply curves (LRAS) for an economy. Suppose the government introduces a set of market reforms that strengthens property rights and makes it easier and safer for buyers and sellers to write contracts. Illustrate the long-term effect of this change by shifting one or both of the curves on the following graph. If you don't believe there will be any long- term eh'ects, leave the curves where they are. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. 240 LRAS O 200 SRAS SRAS 160 LRAS 120 PRICE LEVEL 80 40 0 0 6 12 18 24 REAL GDP (Trillions of dollars)Assuming aggregate demand is not affected by the set of market reforms, the long-run effect of this V supply shock is V in aggregate output and V in the price level