1. Equilibrium The following table shows the real output demanded and supplied at various price levels in a hypothetical economy. Real Output Demanded (Billions of dollars) Price Level (Index number) Real Output Supplied (Billions of dollars) (Billions of dollars) 10 160 85 20 120 80 30 80 70 50 40 50 80 20 20 On the following graph, use the blue points (circle symbols) to plot the aggregate demand (Initial AD) curve for the economy. Then use the orange points (square symbols) to plot the short-run aggregate supply (SRAS) curve for the economy. Note: Line segments will automatically connect the points. PRICE LEVEL (Billions of dollars) 200 160 120 80 40 0 20 60 REAL GDP (Index numbers) 60 100 Initial AD SRAS ❖ 。 ❖ New AD ? The equilibrium price level is, and the equilibrium level of real output is Suppose that the government spending increases by $4 billion and the expenditure multiplier in this economy is 5. On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate demand (New AD) curve. The change in government spending the equilibrium level of real output by
1. Equilibrium The following table shows the real output demanded and supplied at various price levels in a hypothetical economy. Real Output Demanded (Billions of dollars) Price Level (Index number) Real Output Supplied (Billions of dollars) (Billions of dollars) 10 160 85 20 120 80 30 80 70 50 40 50 80 20 20 On the following graph, use the blue points (circle symbols) to plot the aggregate demand (Initial AD) curve for the economy. Then use the orange points (square symbols) to plot the short-run aggregate supply (SRAS) curve for the economy. Note: Line segments will automatically connect the points. PRICE LEVEL (Billions of dollars) 200 160 120 80 40 0 20 60 REAL GDP (Index numbers) 60 100 Initial AD SRAS ❖ 。 ❖ New AD ? The equilibrium price level is, and the equilibrium level of real output is Suppose that the government spending increases by $4 billion and the expenditure multiplier in this economy is 5. On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate demand (New AD) curve. The change in government spending the equilibrium level of real output by
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Transcribed Image Text:1. Equilibrium
The following table shows the real output demanded and supplied at various price levels in a hypothetical economy.
Real Output Demanded
(Billions of dollars)
Price Level
(Index number)
Real Output Supplied (Billions of dollars)
(Billions of dollars)
10
160
85
20
120
80
30
80
70
50
40
50
80
20
20
On the following graph, use the blue points (circle symbols) to plot the aggregate demand (Initial AD) curve for the economy. Then use the orange
points (square symbols) to plot the short-run aggregate supply (SRAS) curve for the economy.
Note: Line segments will automatically connect the points.
PRICE LEVEL (Billions of dollars)
200
160
120
80
40
0
20
60
REAL GDP (Index numbers)
60
100
Initial AD
SRAS
❖ 。 ❖
New AD
?
The equilibrium price level is, and the equilibrium level of real output is
Suppose that the government spending increases by $4 billion and the expenditure multiplier in this economy is 5.
On the previous graph, use the purple points (diamond symbols) to illustrate the effect of the increase in government spending on the aggregate
demand (New AD) curve.
The change in government spending
the equilibrium level of real output by
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