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9. Economic fluctuations I The following graph shows a hypothetical economy in long-run equilibrium at an expected price level of 120 and a notural output level of $600 billion. Suppose the economies of several foreign countries experience rapidly growing incomes, causing foreign spending on domestic goods and services to increase. Using the graph, shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic prospenty abroad. prospenty abroad. In the short run, the increase in foreign spending on domestic goods associated with expansion abroad causes the price level to the price level people expocted and the quantity of output to the natural level of output. The economic prosperity abroad wil cause the unemployment rate to the natural rate of unemployment in the short run. Again, the following graph shows a hypothetical economy experiencing long-run equilibrium at the expected price level of 120 and natural output level of $600 billion, prior to the increase in foreign spending on domestic goods associated with expansion abroad. Along the transition from the short run to the long run, price-level expectations will. and the curve will shift to the Using the graph, illustrate the long-run impact of the economic prospenty abroad by shifting both the aggregate demand (AD) curve and the short run oggregate supply (AS) curve in the oppropriate directions. Using the graph, illustrate the long-run impact of the economic prosperity abroad by shifting both the aggregate demand (AD) curve and the shortrun aggregate supply (AS) curve in the appropriate directions: In the long run, due to the economic prosperity abroad, the price level. the quantity of output natural level of output, and the uriamployment rate the fatural rate. Continue without saving

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