quest # 1-3 Price LevelAS (S)AD ($)601127801626100202512023231402520160261618027131. Graph aggregate supply (AS) curve and aggregate demand (AD) curve.2. At price level = 160, what will happen to the price level - (stays same or decreases or increases)? Why?3. What is the equilibrium price level and the equilibrium GDP?4. Assume potential GDP is $20. The economy in #3 is:( RecessinaryInflationaryIdeal/desirable)5. If aggregate demand decreases by $5 at every price level, the economy will have a new aggregatedemand curve. Add the new aggregate demand curve to your graph (drawn in #1)6. With the new AD curve, what is the equilibrium price level and the equilibrium GDP?7. Assume potential GDP is $20. The economy in #6 is:( RecessinaryInflationaryIdeal/desirable )8. Do you agree or disagree with the Keynesian view? Why? Write your opinion in one or twoparagraphs.9. "Tax financing" and "deb financing" have a similar effect on the spending multiplier. Explainconcisely.

Surplus is the situation where aggregate supply is higher than aggregate demand.

1. Graph aggregate supply (AS) curve and aggregate demand (AD) curve. 2. At price level = 160, what will happen to the price level - (stays same or decreases or increases)? Why? 3. What is the equilibrium price level and the equilibrium GDP?

1. Graph aggregate supply (AS) curve and aggregate demand (AD) curve. 2. At price level = 160, what will happen to the price level - (stays same or decreases or increases)? Why? 3. What is the equilibrium price level and the equilibrium GDP?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

quest # 1-3

Price Level
AS (S)
AD ($)
60
11
27
80
16
26
100
20
25
120
23
23
140
25
20
160
26
16
180
27
13
1. Graph aggregate supply (AS) curve and aggregate demand (AD) curve.
2. At price level = 160, what will happen to the price level - (stays same or decreases or increases)? Why?
3. What is the equilibrium price level and the equilibrium GDP?
4. Assume potential GDP is $20. The economy in #3 is:
( Recessinary
Inflationary
Ideal/desirable)
5. If aggregate demand decreases by $5 at every price level, the economy will have a new aggregate
demand curve. Add the new aggregate demand curve to your graph (drawn in #1)
6. With the new AD curve, what is the equilibrium price level and the equilibrium GDP?
7. Assume potential GDP is $20. The economy in #6 is:
( Recessinary
Inflationary
Ideal/desirable )
8. Do you agree or disagree with the Keynesian view? Why? Write your opinion in one or two
paragraphs.
9. "Tax financing" and "deb financing" have a similar effect on the spending multiplier. Explain
concisely.

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