Chapter19: Economic Development
Section: Chapter Questions
Problem 4.6P
Related questions
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
/0
AD2
130
Price index
120
110
100
90
96
80
80
200 240 280 320 360 400 440 480 520 560
Real GDP](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F2951e469-0367-4519-b7d3-cd4b03462f42%2Fc68f55d6-0c09-4d56-b9f4-afc1f7689a02%2Faaplilp_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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
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