Question

Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States. The Aggregate Demand/Aggregate Supply Model is first explained in Chapter 11

of your text. Carefully explain your graph.

You should draw your own AD/AS graph which you can then scan and paste into your post. Your graph needs to be clearly labeled and explained carefully. Make sure that your graph includes an aggregate demand (AD) curve, a short run aggregate supply (SRAS) curve, and a long run aggregate supply curve (LRAS, Potential GDP) curve. You should clearly label both axes of the graph. Identify the current price level using the GDP deflator

on the vertical axis and the level of real GDP

on the horizontal axis. Explain the current state of the economy relative to potential GDP. You are encouraged to use the most recent data from the fourth quarter or 2018 which is available on Fred.

You should have gathered enough information about the current state of the economy and its relationship to Potential GDP to complete this post successfully.

You can use the graph below as a model. Hint: the U.S. economy is closer to the Potential GDP than the equilibrium illustrated on the graph below. The relevant Price Level is the GDP Deflator and the base year is 2012.

Answer 1