If there is no unemployment insurance, then you would be willing to accept very low wages to avoid being unemployed. • Why does the expected price level P e matter (not the actual price level P)? The interactive graph below (Figure 2) shows the aggregate supply curve shifting to the left, from SRAS 0 to SRAS 1 … As technical indicators go, a resistance level takes some of the ambiguity out of trading. Support is a price level where a downtrend can be expected to pause due to a concentration of demand or buying interest. This means that at each given price level for outputs, a higher price for inputs will discourage production because it will reduce the possibilities for earning profits. (Because: optimism on expected income . So, option 'b' is correct. The higher nominal interest rate increases the cost of holding money and therefore reduces the demand for real money balances. The exchange rate has an important relationship to the price level because it represents a link between domestic prices and foreign prices. Suppose the expected price level is 130. • What are the other factors z?One example is unemployment insurance. • Why does the unemployment rate u matter? A support level is the price at which a stock generates interest from a sufficient number of buyers to cause a price spike. If the price level turns out to be 130 à producers supply the economy’s potential output à unemployment is at the natural rate. Definition. This is expected to offset price increases caused by bottlenecks in the supply chain. Short Run Aggregate Supply shifts left In the long run, the changes in the expected price level will not affect the aggregate supply because the period will be long enough to materialize the expected and actual price levels. increases consumption spending) ... workers and firms must increase prices and wages to compensate for inflation/increased price level) Term. Why is a resistance level significant? The highest price level among EU Member States was observed in Denmark, 41% above the EU average, while in Bulgaria the price level was 47% below the EU average. A higher price level increases output, if the expected price level does not change, since the real wage rate decreases. Other examples of z include the minimum wage. Because the Fed has not changed the quantity of money available today, the reduced demand for real money balances leads to a higher price level. Unexpected increase in the price. 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