Question

1. Suppose that the aggregate demand supply schedules for a hypothetical economy are shown as below: AD (in billion ) Price level index) SRAS (in billion $ $100 300 $450 200 250 400 300 200 300 400 150 200 500 100 100 a. Use these sets of data to graph the aggregate demand and aggregate supply curves. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output? Suppose that buyers desire to purchase $200 billion of extra real output at each price level. Sketch in the new aggregate demand curve as ADI. What is the new equilibrium price level and level of real output? b.

Answer 1

Que ! ca y ADL a RAS 300 force 200 E revet too ADA + 0 x loo 200 300 400 Soo output Sea 30o Equillibrium level of is when price ADO SRAS Price = 200 $ Output ② Equillibrium ADI SRAS Price 20 uoo Equestritrea when at > Output