Price Level AD AS
110 700 600
120 690 640
130 680 680
140 670 720
150 660 740
160 650 760
170 640 770
1) What is an equilibrium price and quantity?
2) Imagine that as a result of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium.
3) How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?