Question

Use the following table to answer the questions. Columns (1) and (2) give information about the short- run aggregate supply curve for Arboe, Column (3) shows total employment at different output levels. There are 200,000 workers in the total labor force. Normally 10,000 workers are structurally and frictionally unemployed. 100 (1) Overall Price Level 4.60 Opeks 4.50 Opeks 4.40 Opeks 4.30 Opeks 4.20 Opeks 4.10 Opeks 4.00 Opeks (2) Aggregate Output 2550 2500 2400 2300 2000 1600 1000 (3) Total Output Employment Demanded 191000 190000 400 189000 188000 1000 184000 1300 178000 1600 168000 1900 (5) Output Demanded 800 1100 1400 1700 2000 2300 2600 100

Answer 1

The Central bank, Abrobank, undertakes an expansionary monetary policy, an open market purchase of securities. The new aggregate demand curve is described in Column (1) and (5). The equilibrium price level is 4.20 Opeks and the equilibrium output is 2000. The unemployment rate is 8%. Cyclical unemployment rate is 3% inflation rate is 4.7%.