
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:The graph below shows an economy in long-run equilibrium. Suppose that aggregate demand unexpectedly increases so that the
short-run equilibrium real GDP increases above $80 billion.
a. Using the AD-AS graph below, demonstrate the new price level and long-run equilibrium real GDP that will result assume that the
new classical view of a self-correcting economy is accurate.
Instructions: Use the tools provided 'AD2' and 'AS2' to plot AD and AS after the increase in aggregate demand and the economy's
self-correction. Then use the tool provided 'e2' to indicate the new long-run equilibrium point.
Price level
130
120
110
100
90
80
AS2
40
AS LR
80
120
AD₁
AS₁
AD2
160
Real domestic output (billions of dollars)
200
Tools
AD2
AS2
Ⓡ
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- I need help soon as possible I have hour and half to finish please.arrow_forwardAn economist for the ruritanian ministry of economy recommends a tax to households of 20 billion. The country currently has a savings rate of 15%. On a seperate sheet of paper. graph a notional AD/AS model and explain what happens in the long run .arrow_forwardSuppose the economy is in a situation of moderate unemployment, and then an exogenous increase of aggregate demand occurs. (Assume the aggregate demand schedule follows the pattern set out by the mainstream story.) Use short run aggregate supply and aggregate demand analysis to discuss in detail the effects of this demand change on the price level and real GDP in the short run. Explain how the situation could change in the long run after the happenings in the first part.arrow_forward
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