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Question 1

The graph below shows the AD-AS diagram for Norway.

Suppose that the economy is initially in long-run equilibrium with the price level of 800.

Now suppose that the Aggregate Demand (AD) curve shifts left from AD1 (blue) to AD2 (green).

What is the new GDP in the short-run as a result of this shift?

 

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Question 2

What is the new price level in the short-run as a result of this shift?

 

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Question 3

What is the price level in the new long-run equilibrium as a result of this shift?

 

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Question 4

What is GDP in the new long-run equilibrium as a result of this shift?

 

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Question 5

What causes the economy to move from the short-run equilibrium to the new long-run equilibrium?

 

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