Assume that the diagram that follows depicts aggregate supply and demand conditions in an economy. Full employment occurs when $6 trillion of real output is produced. What is the equilibrium rate of output? b. How far short of full employment is the equilibrium rate of output? а. с. Illustrate a shift of aggregate demand that would change the equilibrium rate of output to $6 trillion. Label the new curve AD2. d. What is the price level at the new equilibrium? Illustrate a shift of aggregate supply (AS2) that would, when combined with AD1, move equilibrium output to $6 trillion. f. е. What is the price level at this new equilibrium? AS, 250 240 230 220 210 AD, 200 190 180 170 160 150 140 130 120 110 100 3 P.16 REAL OUTPUT (in S trilions per year) PRICE LEVEL (average price)

Assume that the diagram that follows depicts aggregate supply and demand conditions in an economy. Full employment occurs when $6 trillion of real output is produced. What is the equilibrium rate of output? b. How far short of full employment is the equilibrium rate of output? а. с. Illustrate a shift of aggregate demand that would change the equilibrium rate of output to $6 trillion. Label the new curve AD2. d. What is the price level at the new equilibrium? Illustrate a shift of aggregate supply (AS2) that would, when combined with AD1, move equilibrium output to $6 trillion. f. е. What is the price level at this new equilibrium? AS, 250 240 230 220 210 AD, 200 190 180 170 160 150 140 130 120 110 100 3 P.16 REAL OUTPUT (in S trilions per year) PRICE LEVEL (average price)

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter33: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 5PA

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Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown below: 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? Explain.b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250?c. Suppose that buyers desire to purchase $200 billion of extra real output at each price level. Sketch in the new aggregate demand curve as AD1. What factors might cause this change in aggregate demand? What is the new equilibrium price level and level of real output?
10. Which of the following are reasons why the short-run Aggregate Supply curve shown in the right-hand diagrams may be vertical? a) The economy at this level of real GDP would be operating beyond the full-employmetn level. b) Inflationary expectations have set-in so, the owners of resources are acting on these inflationary expectations and insisting on higher resource prices in anticipation of future products price inflation. c) Short-run Aggregate Suply in the Classical model is always constant. d) All the above e) Only (a) and (b) are true. f) None of the above.
Assume that (a)the price level is flexible upward but not downward and (b) the economy iscurrently operating at its full-employment output. Other things equal, how willeach of the following affect the equilibrium price level and equilibrium levelof real output in the short run?· An increase in aggregate demand.· A decrease in aggregate supply, with no change in aggregatedemand.· Equal increases in aggregate demand and aggregate supply.· A decrease in aggregate demand.· An increase in aggregate demand that exceeds an increase inaggregate supply.
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1.Now suppose that the increase in investment spending was entirely anticipated by firms and workers. This means the public fully anticipates the rightward shift of the aggregate demand curve (from AD1AD1 to AD2AD2). According to rational-expectations adherents, the anticipated change in aggregate demand will cause the economy to move in which direction? A.Directly from point N to point Z B.From point N to point K, before returning to point N C.From point N to point D, before returning to point N D.From point N to point D and, eventually, from point D to point Z 2.Suppose next year, the Fed once again announces that its monetary policy is aimed at maintaining price stability at the level reached last year (the price level you found in the previous question) and output at potential output ($8 trillion). However, because the government reneged on its promise last year, workers and firms suspect that the Fed will again shift to an expansionary policy. As a result,…
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Real GDP Real GDPDemanded, Price Level Supplied,Billions (Price Index) Billions$100 300 $450200 250 400300 200 300400 150 200500 100 100 Use these sets of data to graph the aggregate demandand aggregate supply curves. What is the equilibriumprice level and the equilibrium level of real output inthis hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output?Explain.b. Why will a price level of 150 not be an equilibriumprice level in this economy? Why not 250?c. Suppose that buyers desire to purchase $200 billion ofextra real output at each price level. Sketch in the newaggregate demand curve as AD1. What factors mightcause this change in aggregate demand? What is thenew equilibrium price level and level of real output?