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Back to Assignment Attempts Average / 8 inaction) in the AD-AS model The following graph shows a (grey star symbol) tresponds to the intersection of the AD. and SPAS, curves! EE 7 IRAS SRAST GRAS, No Intervention Fed Intervenes PRICE LEVEL AD AD REAL GDP (Trialians of dollars) According to the graph, the potential outp Since real GDP is currently $20 trillion Along SRAS], wages would have been n ince the actual price level at point A is 155, this means that real wages are had been negotiated, which will ent. In the Fed does not intervene , the labor market conditions would cause nominal shirting the curve to the Eventually, the economy would reach a new long-run equilibrium. On the previous graph, use the tan point (dash symbol) to Ma vene (Assume there are no feedback effects on the curv Now suppose the Fed chooses to intervene in an effort to move the ed al output. To do so, the Fed will the money supply, which will the in investment, shifting the curve to the On the previous graph, place the black poi at (plus symbol) at the new long-run e level if the Fed intervenes in this way and successfuly brings the economy back to long-run