ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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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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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