Measure the slope of short-run aggregate supply from your own shifts
Three steps, the way the exam actually works: work through the lab, write down your own measurements, then answer a 6-point free response. What you recorded goes to the grader with your writing, so a conclusion that does not follow from your own numbers will cost you the point — exactly as it would with a real reader.
Predict before you look
- An aggregate demand shift slides the economy along the short-run aggregate supply curve. Which way does that curve slope, and why?
- If two points lie on the same straight curve, what does the ratio of their vertical change to their horizontal change give you?
Nothing to submit here — these are to think through, so the prediction below is an informed one rather than a guess.
Commit to an answer now. It is not graded and being wrong costs nothing — the point is to have something specific to reconcile against once you have the data.
Answer every prediction to unlock the lab. A sentence is enough.
Run the investigation
Predictions first
The procedure and the simulation unlock once you have committed above. Observing before predicting is how a wrong intuition survives a lab intact.
Record what you measured
These are your numbers, not ours. The grader sees them, so your conclusions have to follow from what you actually recorded.
| Real GDP at the starting equilibrium | |
|---|---|
| Price level at the starting equilibrium | |
| Real GDP after the expansionary AD action | |
| Price level after the expansionary AD action | |
| Real GDP after the contractionary AD action | |
| Price level after the contractionary AD action |
Answer the free response
Because aggregate demand shifts move the economy along a fixed short-run aggregate supply curve, your own data can be used to measure that curve. (a) Using your expansionary data, calculate the change in the price level divided by the change in real GDP. Show your work and state what that ratio represents. (b) Repeat the calculation with your contractionary data and compare the two results. Explain what it tells you about the SRAS curve in this model that the two ratios agree. (c) Both of your AD actions moved output and the price level in the same direction. Explain why an aggregate demand shift must do this, and state what would have been different had you used a supply-shock button instead. (d) A classmate concludes from part (a) that expansionary policy "causes" the price level to rise because firms become greedy. Give the correct explanation in terms of production costs and sticky nominal wages.
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