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140 AD /0 AD2 130 Price index 120 110 100 90 96 80 80 200 240 280 320 360 400 440 480 520 560 Real 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

The graph below shows, the aggregate demand and supply for the economy of Etrusca. a. Draw AD2 on the graph below assuming an increase of $60 in aggregate demand. Plot only the endpoints of the curve below b. What is the new level of equilibrium GDP? c. What is the new equilibrium price level? d. How much is the reduction in GDP due to the crowding out effect?

140
AD
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AD2
130
Price index
120
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200 240 280 320 360 400 440 480 520 560
Real GDP

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