Question

In the short run, the decrease in consumption spending associated with the housing market contraction causes the price level to \underline{\qquad} the price level people expected and the quantity of output to \underline{\qquad} the natural level of output. The housing market slump will cause the unemployment rate to \underline{\qquad} the natural rate of unemployment in the short run. Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the decrease in consumption spending associated with the housing market contraction. During the transition from the short run to the long run, price-level expectations will \underline{\qquad} and the \underline{\qquad} curve will shift to the \underline{\qquad}. Now show the long-run impact of the housing market slump by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions.

          In the short run, the decrease in consumption spending associated with the housing market contraction causes the price level to \underline{\qquad} the price level people expected and the quantity of output to \underline{\qquad} the natural level of output. The housing market slump will cause the unemployment rate to \underline{\qquad} the natural rate of unemployment in the short run.

Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of $600 billion, before the decrease in consumption spending associated with the housing market contraction.

During the transition from the short run to the long run, price-level expectations will \underline{\qquad} and the \underline{\qquad} curve will shift to the \underline{\qquad}.

Now show the long-run impact of the housing market slump by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions.

In the short run, the decrease in consumption spending associated with the housing market contraction causes the price level to the price level people expected and the quantity of output to the natural level of output. The housing market slump will cause the unemployment rate to the natural rate of unemployment in the short run.

Again, the following graph shows the economy in long-run equilibrium at the expected price level of 120 and the natural level of output of 600 billion, before the decrease in consumption spending associated with the housing market contraction.

During the transition from the short run to the long run, price-level expectations will and the curve will shift to the .

Now show the long-run impact of the housing market slump by shifting both the aggregate demand (AD) curve and the short-run aggregate supply (AS) curve to the appropriate positions.

Added by Mark P.

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