Aggregate Demand & Aggregate Supply Graphs. For each of the scenarios below, you will be required to draw an AD-AS graph and attach it. Each graph should have correctly labeled axes, AD, SRAS, and LRAS at a labeled potential real GDP. Unless otherwise indicated, each graph should begin at long-run macroeconomic equilibrium. Unless otherwise indicated, each graph should only illustrate short-run effects. Each graph should indicate any change in price level and real GDP with sequenced indicators on the axes. Please refer to the class lectures for examples of sequenced indicators. A reduction of the interest rate.
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A sizable increase in labor productivity with no change in nominal wages.
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A 12 percent increase in nominal wages with no change in productivity.
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The government cuts spending on healthcare, education, and entitlements.
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The public believes that inflation will increase significantly.
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