\fIn the following table, determine how each event affects the position of the long-run aggregate supply (LRAS) curve. Direction of LRAS Curve Shift Many workers leave to pursue more lucrative careers in foreign economies. This economy's primary source of foreign oil decides to cease exports for political reasons. A government-sponsored training program increases the skill level of the workforce.12 . Shifts of the aggregate supply curve Which of the following would properly be classied as a favorable supply shock? 0 There is an increase in government spending. 0 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 rms nationwide. O The interest rate decreases, spurring investment spending. 0 The world price of oil increases rapidly without warning and is expected to remain at the newI high level for many years, making it more expensive for all rms to produce goods and services. 0 There is a technological improvement that allows rms to reduce their costs of production permaneny. The following graph shows the shortrun and longrun aggregate supply curves (ERAS and LRAS) for an economy. Suppose the government passes a temporary 'gas tax holiday," removing the federal tax on gasoline between May and September. Drag one or both of the curves on the graph to illustrate the fangberm effects of this change. If you don't believe there wrrr be any longterm e'ects, leave the curves where they are. ('2) 2-10 mils 2m ERAS ems + 160 _. LRAS LIJ i=- LIJ ' 120 LIJ 9 EC EL 3-D \fGiven the economic conditions depicted by the graph, answer the oiiowing questions. True or False: The economy is currently in longrun equilibrium. O True 0 False The economy is best described as being 7 \fAs lire price level falls, lire cost of borrowing money will V , causing the :quanljtrlr of output demanded to v . Additionally, as the price level falls, the impact on the domesh'c interest rate will cause the real value of the dollar to V in foreign exchange markets. 1119 number of domestic products purchased by foreigners (exports) will therefore I V . 3. Why the aggregate demand curve slopes downward The following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 140, and the quantity of output demanded is $300 billion. Moving down along the aggregate demand curve from point A to point B, the price level falls to 120, and the quantity of output demanded rises to $500 billion. (?) 170 180 150 A 40 130 PRICE LEVEL B 120 110 AD 0 100 200 300 10 500 600 700 800 OUTPUT (Billions of dollars) As the price level falls, the cost of borrowing money will , causing the quantity of output demanded to Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore , and the number of foreign products purchased by domestic consumers and firms (imports) will . Net exports will therefore\fGiven the economic conditions depicted by the graph, answer the following questions. True or False: The economy is currently in short-run equilibrium. O True O False The current level of real GDP is the full-employment level of GDP. Now consider the following economic conditions. (?) LRAS 140 130 SRAS 120 110 100 PRICE LEVEL 90 AD 30 70 85 70 75 80 85 90 95 100 80 OUTPUT5. Short-run equilibrium and long-run equilibrium The following graph shows the economic conditions of a hypothetical economy. (? LRAS 140 130 SRAS 120 110 100 PRICE LEVEL AD 70 80 85 70 75 80 85 90 95 100 OUTPUT