00:04
Assume an economy operates in the intermediate range of its aggregate supply curve.
00:11
State the direction of the shift in the aggregate demand or aggregate supply curve of each of the following and the impact of the change on the price level, gdp, and employment.
00:25
The first one says a rise in the price of crude oil.
00:50
If this happens the cost of production of goods and services is going to increase.
00:56
So therefore we're going to have aggregate supply shift to the left because producers will not supply as much.
01:13
So then we can see that this is going to increase the price level and we can also see that real gdp has decreased.
01:36
So if real gdp decreases then unemployment is going to increase.
01:47
So employment decreases.
01:54
So real gdp and employment are basically the same thing on this graph.
02:02
So the next change is that spending on national defense increases.
02:12
So government spending increases and that affects the aggregate demand curve.
02:17
So the aggregate demand curve is going to shift to the right.
02:29
So now we can see that since the aggregate supply curve does not shift we're going to look at this point compared to the original point here.
02:43
So we could see price level has gone up and real gdp has gone up...