Suppose the U.S. economy is initially (year 2020) in both short-run and long-run equilibrium and it is described by following functions: AD function: Y=12-P SRAS function: Y=YN+P-Pe where the expected price is Pe=2 and the natural rate of output is YN=10. Then, an expansion in AD occurs in year 2021 such that the new AD function is: Y=14-P Compute the Real GDP growth rate from 2020 to 2021 if the economy is now in short-run equilibrium only.
Suppose the U.S. economy is initially (year 2020) in both short-run and long-run equilibrium and it is described by following functions: AD function: Y=12-P SRAS function: Y=YN+P-Pe where the expected price is Pe=2 and the natural rate of output is YN=10. Then, an expansion in AD occurs in year 2021 such that the new AD function is: Y=14-P Compute the Real GDP growth rate from 2020 to 2021 if the economy is now in short-run equilibrium only.
Chapter10: Aggregate Demand And Supply
Section10.A: The Self Correcting Aggregate Demand And Supply Model
Problem 7SQ
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Suppose the U.S. economy is initially (year 2020) in both short-run and long-run equilibrium and it is described by following functions:
AD function:
Y=12-P
SRAS function:
Y=YN+P-Pe
where the expected price is Pe=2 and the natural rate of output is YN=10.
Then, an expansion in AD occurs in year 2021 such that the new AD function is:
Y=14-P
Compute the Real
(Express your answer in percent omitting the symbol %. For example, for 2% enter 2)
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