Please answer all!! 8.Problems and Applications Q8 As described in the chapter,
ID: 1107777 • Letter: P
Question
Please answer all!!
8.Problems and Applications Q8 As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising commodity prices Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregate supply and aggregate demand on the following graph. Then on the subsequent graph, indicate what happens in a Phillips-curve diagram 2 LRAS Aggregate Supply Aggregate Demand LRAS Aggregate Demand Long-Run Equilibrium Quantity of OutputExplanation / Answer
The decrease in aggregate demand and the decrease in aggregate supply will cause the unemployment to rise.
The given statement is false as the decrease in aggregate demand causes the prices to rise and can cause an increase in unemployment level. The decrease in aggregate supply is addressed by pursuing restrictive monetary policy .