Question

Question 21 1 pts Use the following table which shows the aggregate demand and aggregate supply schedule for a hypothetical economy to answer the next question. Real Domestic Output Demanded Price Level Real Domestic Output Supplied (in billions) (index value) (in billions) $3,000 350 $9,000 4,000 300 8,000 5,000 250 7,000 6,000 200 6,000 7,000 150 5,000 8,000 100 4,000 At the price level of 150, there will be a general surplus in the economy, and output supplied will decrease as the price level falls. shortage in the economy, and output demanded will decrease as the price level rises. surplus in the economy, and output supplied will increase as the price level rises. shortage in the economy, and output demanded will increase as the price level falls. 8

Answer 1

21. At the price level of 150, quantity demanded exceeds quantity supplied , this implies that there is shortage in the economy and output demanded will decrease as the price level rises. Hence,option(B) is correct.

22. If Q1 is full employment output then the long run aggregate supply curve is located at output level Q1 because in the long run the economy is at full employment level. Hence,option(C) is correct.

23. A shift from AD1 to AD2 would be consistent with the demand pull inflation in the late 1960s. Hence, option(A) is correct.