The long-run aggregate supply curve and the short-run

Question # 00578085 Posted By: dr.tony Updated on: 08/24/2017 07:11 AM Due on: 08/24/2017
Subject Economics Topic Macroeconomics Tutorials:
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Supply shocks and price stabilization

Both the long-run aggregate supply curve and the short-run aggregate supply curve shift in response to changes in the availability of labor or capital or to changes in technology and productivity. A widespread temporary change in the prices of factors of production, however, can cause a shift in the short-run aggregate supply curve without affecting the long-run aggregate supply curve.

Tasks:
Suppose there is a temporary but significant increase in oil prices in an economy with an upward-sloping Short-Run Aggregate Supply (SRAS) curve. If policymakers wish to prevent the equilibrium price level from changing in response to the oil price increase, should they increase or decrease the quantity of money in circulation? Why?

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  1. Tutorial # 00575999 Posted By: dr.tony Posted on: 08/24/2017 07:12 AM
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