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Chapter 11: 28 (page 292)

Will the shift of SRAS to the right tend to make the equilibrium quantity and price level higher or lower? What about a shift of SRAS to the left?

Short Answer

Expert verified
When the aggregate supply curve changes to the right, a bigger amount of real GDP is created at every price level.
When the SRAS curve changes to the left, the amount of real GDP produced at each price level decreases.

Step by step solution

01

Introduction 

Short-run aggregate supply (SRAS) is a graphical model that depicts the positive link between an economy's aggregate price level and the amount of aggregate output it produces.

02

SRAS curve representation

The curve is

Real GDP is plotted on the x-axis, while price level is plotted on the axis in the diagram above.

03

Shift of SRAS

Equilibrium E0is achieved by intersecting AD and SRAS0.
Y0represents output, whereas P0represents price level.
Equilibrium changes from E0to E1when the SRAS curve moves leftward from SRAS to SRAS1.
Price level climbed from P0to P1as a result of the shift to the left, but GDP declined from Y0toY1.

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Most popular questions from this chapter

Suppose the level of structural unemployment increases. How would you illustrate the increase in structural unemployment in the AD/AS model? Hint: How does structural unemployment affect potential GDP?

How is the natural rate of unemployment

illustrated in an AD/AS model?

Name some factors that could cause AD to shift, and say whether they would shift AD to the right or to the left.

A policymaker claims that tax cuts led the economy out of a recession. Can we use the AD/AS diagram to show this?

Why would an economist choose either the neoclassical perspective or the Keynesian perspective, but not both?
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