Question: Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown:
|
Amount of real GDP demanded.
Billions
|
Price level
(price index)
|
Amount of real GDP supplied.
Billions
|
|
100
|
300
|
450
|
|
200
|
250
|
400
|
|
300
|
200
|
300
|
|
400
|
150
|
200
|
|
500
|
100
|
100
|
a. use the above data to graph aggregate demand 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?
b. If the price level in this economy is 150, will quantity demand equal, exceed, or fall short
of quantity supplied? By what amount? If the price level is 250, will quantity demand equal, exceed, or fall short of quantity supplied? By what amount?
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 is the new equilibrium price level and level of real output?