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Consider the dynamic aggregate demand and aggregate supply diagram for a hypothetical economy. Between 2031 and 2032, the aggregate demand curve (AD) shifts from ADI to ADQ, the shortrun aggregate supply curve (SEAS) shifts from SRA81 to SRASQ, and the longrun aggregate supply curve {LRA.S) shifts from LRASI to LRASg. 110 106 PRlCE LEVEL (CPI) 6.6 6.8 REAL GDP (Tl'illions Of dollars) The ination rate between 2031 and 2032 is V . The growth rate of fullemployment output between 2031 and 2032 is V . Which of the following best explains the economic developments from 2031 to 2032? O The economy operated at fullemployment output in 2031, but the subsequent increase in aggregate demand was not enough to restore the economy to fullemployment output, leading to a recessionary gap in 2032. O The economy experienced costpush ination. O A strong increase in aggregate demand allowed the economy to grow out of a recessionary gap in 2031 to full employment in 2032. which of the following are possible reasons for the rightward shift of the LRAS curve between 2031 and 2032? Check a\" that appiy. D An increase in government purchases [3 An improvement in technology [3 An increase in the size of the labor force The following graph shows the aggregate demand (A31) and aggregate supply (AS) curves for a hypothetical economy with fullemployment output of $11 trillion. 1310 AS AD 120 \"5 + Macro Eq 2 110 105 PRICE LEVEL (CPI) 100 95 --+ 90 8.0 8.5 9.0 9.5 10.0 10.5 11.0 11.5 12.0 REAL GDP (T rillions of dollars) Suppose the level of real GDP supplied by rms is $10 trillion and the price level is 102. In this case, the quantity of real GDP supplied is v the real GDP demanded at a price level of 102, and rms will experience an unplanned V in inventories. Firms will respond to the change in inventories by producing V output until the economy reaches macroeconomic equilibrium at a price level of V and real GDP of V . Suppose consumers and businesses become less optimistic about future economic conditions, causing the aggregate demand curve to decrease by $1.5 trillion at each price level. Use the green line (triangle symbols) to show the new aggregate demand curve (ADg). Be sure that AD; is parallel to AD1 (you can click on ADI to see its slope). Then use the purple drop lines {diamond symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. The decrease in aggregate demand leads to a movement along the V range of the aggregate supply curve, causing the equilibrium price level to V and the equilibrium level of real GDP to V . The following graph shows an increase in aggregate supply (AS) in a hypothetical economy. Specifically, aggregate supply shifts to the right from A31 to A32, causing the quantity of output supplied at a price level of 125 to rise from $250 billion to $350 billion. C) 200 As 115 1 AS 150 2 E -----------+----+ PRICE LEVEL (CPI) d 5|] 25 (l 50 100 150 200 250 300 350 400 REAL GDP (Billions of dollars) The following table lists several determinants of aggregate supply. Complete the table by indicating the changes in the determinants necessary to increase aggregate supply. Determinant Change Needed to Increase AS Nominal Wage Rate 7 Tax Rates v Technology v