Cards (10)

    • What was the initial equilibrium level of output represented as?
      AP1Y1
    • What does the equilibrium at AP1Y1 represent?
      A recessionary or negative output gap
    • What is the negative output gap equal to?
      Y1YFE
    • What happens when one of the determinants of SRAS increases?
      SRAS shifts from SRAS1 to SRAS2
    • What is the effect on average prices when SRAS increases?
      Average prices fall to AP2
    • What is the new real level of output after the increase in SRAS?
      Y2
    • Where is the new short-run equilibrium located?
      At AP2Y2
    • Is there still a negative output gap at the new equilibrium?
      Yes, but it is smaller (Y2YFE)
    • What is the new negative output gap equal to?
      Y2YFE
    • increase in SRAS