Consider the variables that shift long-run aggregate supply and the variables that shift short-run aggregate supply. Match each of the following scenarios with one of the following three graphs of long-run aggregate supply and short-run aggregate supply.

1

Real GDP

Price level

SRAS 2SRAS2SRAS 1SRAS1LRAS 1LRAS1LRAS 2LRAS2

The image, labeled 1, is the first diagram in the panel of three graphs displaying shifts of the aggregate supply curve. The horizontal axis measures the real GDP and the vertical axis measures the price level. The graphs show an upward-sloping, linear curve, labeled SRAS subscript 1 and a vertical line intercepting the horizontal axis, labeled LRAS subscript 1. SRAS subscript 1 intersects LRAS subscript 1. Arrows on the graph show that SRAS subscript 1 shifts rightward to SRAS subscript 2 and LRAS subscript 1 shifts rightward to LRAS subscript 2.The distance between LRAS subscript 1 and LRAS subscript 2 is bigger than the distance between SRAS subscript 1 and SRAS subscript 2.

2

Real GDP

Price level

SRAS 1SRAS1SRAS 2SRAS2LRASLRAS

The image, labeled 2, is the second diagram in the panel of three graphs displaying shifts of the aggregate supply curve. The horizontal axis measures the real GDP and the vertical axis measures the price level. The graphs show an upward-sloping, linear curve, labeled SRAS subscript 1 and a vertical line intercepting the horizontal axis, labeled LRAS subscript 1. SRAS subscript 1 intersects LRAS subscript 1. An arrow on the graph shows that SRAS subscript 1 shifts leftward to SRAS subscript 2.

3

Real GDP

Price level

SRAS 2SRAS2SRAS 1SRAS1LRASLRAS

The image, labeled 3, is the third diagram in the panel of three graphs displaying shifts of the aggregate supply curve. The horizontal axis measures the real GDP and the vertical axis measures the price level. The graphs show an upward-sloping, linear curve, labeled SRAS subscript 1 and a vertical line intercepting the horizontal axis, labeled LRAS subscript 1. SRAS subscript 1 intersects LRAS subscript 1. An arrow on the graph shows that SRAS subscript 1 shifts rightward to SRAS subscript 2.

a. A decrease in the expected future price level

3

b. Workers and firms adjust to having previously underestimated the price level

2

c. A positive technological change occurs

1 8th EditionN. Gregory Mankiw704 explanations

David Anderson, Margaret Ray912 explanations

3rd EditionPaul Krugman, Robin Wells312 explanations

7th EditionAlan J. Marcus, Alex Kane, Zvi Bodie400 explanations