The following graph represents the short-run aggregate supply curve (SRAS) based on an expected price level of 120. The economy's full-employment output level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 120, but the actual price level turns out to be 160. Show the short-run effect of the unexpectedly high price level by dragging the curve or moving the point to the appropriate position. 240 200 SRAS[120] SRAS[120] 160 PRICE LEVEL (CPI) 120 correct? BO 40 0 3 6 9 12 15 18 REAL GDP (Trillions of dollars)Interpret the change you drew on the preyious graph by filling in the blanks in the following paragraph: The higher-than-expected price level causes firms to earn profit than they expected on each unit of output they produce, and, therefore, they their production level. At the same time, the real value of wages and other resource prices is than workers and firms expected when they signed longterm contracts As a result, the economy as a whole produces at a level its full employment output, and the unemployment rate is than its natural rate. Now, suppose prices remain higher than expected. As a result, in the next round of labor negotiations, unions demand and obtain higher wages for their members. The followmg graph shows the longrun aggregate supply curve (LRAS) at full-employment output for this economy as well as the same initial short-run aggregate supply curve as in the first graph. Shift one or both of these lines to illustrate how the economy adjusts to a new long-run equilibrium. 240 O m SRAS LRAS El 2 15o g ERAS 4 e m 120 __________ J LLl 9 II D- SD 40 LRAS D D 3 6 Q 12 15 18 REAL GDP (TrilliDnS ofdollars)