9. Applying the extended AD-AS model Financial crises, such as the one that impacted many developed countries starting in 2007, decrease banks' ability and willingness to make loans. Decreased availability of credit decreases businesses' ability to make investment purchases and consumers' ability to buy goods and services. As a result, a financial crisis is a negative shock for an economy. The following graph shows an economy's aggregate demand curve and its short-run and long-run aggregate supply curves after a financial crisis has pushed it into recession. Suppose that the government decides not to use a stabilization policy and allows the economy to adjust on its own. Determine which curve, the aggregate demand curve or the short-run aggregate supply curve, shifts when the economy adjusts in the long run. Use either the blue line (circle symbol) to plot a new aggregate demand curve or the orange line (square symbol) to plot a new short-run aggregate supply curve to show the economy in long-run equilibrium. Make sure the curve you plot is parallel to one of the existing curves. Note: You can check the slope of each line by selecting it. 200 LRAS O 180 New AD 180 AD 140 120 New SRAS 100 PRICE LEVEL 80 SRAS 40 20 2 8 10 12 14 16 18 20 REAL GDP (Trillions of dollars)which of the following statements best describes how the economy will adjust on its own in the long run? 3 High unemployment contributes to a decrease in aggregate demandr and the aggregate demand curve shifts to the left until the economy is back at the long-run equilibrium. '3' lil'u'ages and resource prices fall, and the 3% curve shifts to the right until the economy is back at the long-run equilibrium. 0 Iil'u'ages and resource prices rise, and the SHAS curye shifts to the left until the economy is back at the long-an equilibrium. C' Low unemployment contributes to an increase in aggregate demand, and the aggregate demand curve shifts to the right until the economy is back at the long-run equilibrium. Suppose many firms in this economy pay their workers efficiency wages. This practice will likely lead to a V adjustment of the economy to its long-run equilibrium because firms I.I'rill be 7 likely to '7 the wages of their employees. IWhich of the following statements best describes how the economy will adjust on its own in the long run? C) High unemployment contributes to a decrease in aggregate demandr and the aggregate demand curve shiFts to the leFt until the economy is back at the longrun equilibrium. '3' INages and resource prices fall, and the ERAS curve shifts to the right until the economy is back at the long-run equilibrium. :3 Wages and resource prices rise, and the SHAS curve shifts to the left until the economy is back at the longmn equilibrium. '3' Low unemployment contributes to an increase in aggregate demand, and the aggregate deman il'ts to the right until the economy is back at the long-run equilibrium. M Suppose many rms in this economy pay their workers eFFiciency wages. This pmctice will likely lead to a V adjustment of the economy to its long-run equilibrium because firms will be 7 likely to V the wages of their employees. Which of the following statements best describes how the economy will adjust on its own in the long run? O High unemployment contributes to a decrease in aggregate demand, and the aggregate demand curve shifts to the left until the economy is back at the long-run equilibrium. ) Wages and resource prices fall, and the SR.AS curve shifts to the right until the economy is back at the long-run equilibrium. Wages and resource prices rise, and the SR.AS curve shifts to the left until the economy is back at the long-run equilibrium. Low unemployment contributes to an increase in aggregate demand, and the aggregate demand curve shifts to the right until the economy is back at the long-run eq more less Suppose many firms in this economy pay the 's efficiency wages. This practice will likely lead to a adjustment of the economy to its long-run equilibrium because firms will be likely to the wages of their employees.IWhich of the following statements best describes how the economy will adjust on its own in the long run? 1:) High unemployment contributes to a decrease in aggregate demandr and the aggregate demand curve shifts to the left until the economy is back at the long-run equilibrium. C' IWages and resource prices fall, and the 3% curve shifts to the right until the economy is back at the longrun equilibrium. 0 lil'u'ages and resource prices riser and the ERAS curve shifts to the left until the economy is back at the long-an equilibrium. '3' Low unemployment contributes to an increase in aggregate demand, and the aggregate demand curve shifts to the right until the economy is back at the longrun equilibrium. m Suppose many firms in this economy pay their workers. eiIE ES. This practice will likely lead to a T adjustment of the economy to its long-nun equilibrium because firms will be '7 likely to '7 the wages of their employees