The graph below shows Country A's economy initially in long-run macroeconomic equilibrium. Country A has few...

 

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The graph below shows Country A's economy initially in long-run macroeconomic equilibrium. Country A has few natural resources, so it typically imports most of its raw materials from other countries. When a trade dispute erupts with suppliers of key materials, Country A suffers a short run decline in availability of many raw materials. (a) 5 points. As a result of the trade dispute, which curve(s) in the diagram will shift and in what direction? Briefly justify your answer. (b) 5 points. What is the short-run impact on real GDP, the price level, and the unemployment rate (rise, fall, no change)? Aggregate Price Level (P) Pe 0 LRAS e Qf Aggregate Output (Q) AS AD The graph below shows Country A's economy initially in long-run macroeconomic equilibrium. Country A has few natural resources, so it typically imports most of its raw materials from other countries. When a trade dispute erupts with suppliers of key materials, Country A suffers a short run decline in availability of many raw materials. (a) 5 points. As a result of the trade dispute, which curve(s) in the diagram will shift and in what direction? Briefly justify your answer. (b) 5 points. What is the short-run impact on real GDP, the price level, and the unemployment rate (rise, fall, no change)? Aggregate Price Level (P) Pe 0 LRAS e Qf Aggregate Output (Q) AS AD

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