Refer to the information provided in Figure 13.7 below to answer the questions that follow. Figure 13.7
-Refer to Figure 13.7. If the economy is at Point A, the cost of raw material increased dramatically, and the aggregate demand did not change, the economy could move to Point

Question

Refer to the information provided in Figure 13.7 below to answer the questions that follow.  Figure 13.7
-Refer to Figure 13.7. If the economy is at Point A, the cost of raw material increased dramatically, and the aggregate demand did not change, the economy could move to Point

Quizplus · Accepted Answer

If the cost of raw material increases dramatically and aggregate demand does not change, this will lead to an increase in the cost of production for firms. This increase in costs will cause a decrease in the level of output in the short run, leading to a movement up the SRAS curve from Point A to Point D. The economy will experience higher prices and lower output.

Refer to the Information Provided in Figure 13