AP Macroeconomics 4.

4 Graphing Assignment
Answer each of the questions below on a separate sheet of paper and submit them to your instructor for grading. You can complete the assignment in a computer document, using the drawing tools in Word (or any photo editing program) or complete the activity by hand, submitting a scan or photo of your work. When you are done, submit the assignment for grading by your instructor. his assignment will be graded out of !" points. 1) (6 points) Assume an economy is operating at long run equilibrium. A) Draw an aggregate supply and demand curve that illustrates the economy mentioned above. Label equilibrium output Yp and Price Level P1 B) Assume government spending increase 1 !. "how what happens to the economy in the short run. Be sure to label any new curves# output# and price levels. $i) %denti&y which curved shi&ted and whether it increased or decreased $ii) %denti&y whether a recessionary or in&lationary gap has occured $iii) %denti&y i& any demand pull in&lation# cost push in&lation# or stag&lation has occurred. ') (n the same graph# show and e)plain how the graph will eventually *sel& correct+ bac, to long run equilibrium. 2) (7 points) Assume an economy is operating at long run equilibrium. A) Draw an aggregate supply and demand curve that illustrates the economy mentioned above. Label equilibrium output -1 and Price Level P1 B) Assume businesses across America are paying higher costs &or employee health insurance. "how what happens to the economy in the short run. Be sure to label any new curves# output# and price levels. $i) %denti&y which curved shi&ted and whether it increased or decreased $ii) %denti&y whether a recessionary or in&lationary gap has occured $iii) %denti&y i& any demand pull in&lation or cost push in&lation has occurred. ') (n the same graph# show and e)plain how the graph will eventually *sel& correct+ bac, to long run equilibrium