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What would happen to the price level

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1. Assume that the price of energy has increased significantly. Shift the AS line to show what would happen in the economy. What would happen to the price level? What would happen to real GDP?

2. Assume that labor prices (wages) decreased dramatically. Shift the AS line to show what would happen in the economy. What would happen to the price level? What would happen to real GDP?

3. Draw a new AS AD diagram with the equilibrium near the LRAS line. Assume that consumer confidence has decreased. Shift the AD line to show what would happen in the economy. What would happen to the price level? What would happen to real GDP?

4. On the same diagram show what would happen if there was higher government spending. Shift the AD line to show what would happen in the economy. What would happen to the price level? What would happen to real GDP?

Reference no: EM132476228

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