Name Draw LRAS. What does LRAS stand for? LRAS 2. In your own words, explain a) Conclusion: An increase in demand can change GDP in the what LRAS represents. the long run. _ but will only create relationship between price level cinch real GDP b) Keynesians believe prices are that the . They therefore believe AS is the more important supply curve 3. On the same graph, show c) Which school of thought believes increasing AD can actually change output (look at graphs in 7)? economic growth . 8. Draw the macroeconomy in equilibrium (snowflake). What happens when aggregate demand increases? Show on graph. Label new short run equilibrium E2. What state is this economy in? aptana c a) Give an example of something that could have caused this. SRAS 5. A vertical supply curve implies that prices are yours b) What happens to GDP and price level? 6. A flatter supply curve implies that prices are c) In this scenario, what do we call the difference between actual GDP and 7. In each graph below, label all missing parts then show an increase in potential GDP? aggregate demand. What happens to output (GDP) and prices in each d) What is the unemployment rate relative to the natural rate? scenario? LRAS e) How would the economy fix itself? This means market adjustments, not government intervention. Show on graph. Label new equilibrium E3. Briefly explain. SRAS