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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 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.

Macroeconomics: Private and Public Choice (MindTap Course List)
Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model
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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 GDP growth rate from 2020 to 2021 if the economy is now in short-run equilibrium only.

(Express your answer in percent omitting the symbol %. For example, for 2% enter 2)

 

 

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