Question

5. Consider the data in the following table (where the values for real GDP are in billions of 2009 dollars): SRAS2009 GDP Deflator 100 101 Year 2009 2010 2011 2012 2013 2014 2015 2016 Real GDP (billions of 2009 $) 14,419 14,784 15,021 15,355 15,612 16,013 16,472 16,716 103 105 107 109 110 100 Price level (GDP deflator, 2009 = 100) e 2009 111 On the AD-AS graph, show how the economy moved from 2009 to 2016 by graphing both new AD and new SRAS curves. AD2009 :14.4 Real GDP (trillions of 2009 dollars) 1.) Graph the AD curve for 2016 that is consistent with the data in the table showing what happened in the economy. Label your line AD 2016- 2.) Graph the SRAS curve for 2016 that is consistent with the data in the table showing what happened in the economy. Label your line SRAS2016- 3.) Plot the new short-run equilibrium point. Label your point e2016 In which direction did the economy move from 2009 to 2016? Offer an explanation which would account for the

Answer 1

AD and AS shift and move upward and economy is in high growth measured by real GDP. In nominal tern in increase by even more. Data shows both AD and AS move to higher equilibrium at higher price.

SARS2016 SRAS2009 SRASE 2009=100 Parze levellenop debraks) e2016 Xezoog / 22oo9 NAD 2009 AD 2016 114.4 ligoz 2009 Real GDP (torliin USD 2009 CScanned with CamScanner

Over the period the year 2009 to 2016, real GDP has grown by 15% while it is 11% for price index. Hence it shows higher real GDP growth. Hence AS moves along the curve and shift a bit, while AD curve shift a lot and cause the AD=AS.