Problem
1. In the diagram sketch a line representing a potential output of $10 trillion. Sketch a short-run aggregate supply curve when the expected price level is 120.
2. In the diagram for this exercise, use aggregate demand and short-run aggregate supply curves to show an economy at a short-run equilibrium with an expansionary gap, when potential output is $10 trillion. Then illustrate how the gap would close in the long run.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.