### AD-AS Model ExplanationThe graph illustrates the Aggregate Demand (AD) and Aggregate Supply (AS) model, representing the relationship between the price level and real output in an economy.#### Elements of the Graph:- **AD Curves:** There are three Aggregate Demand curves shown: AD1, AD2, and AD3. Each curve represents different levels of demand.- **AS Curve:** The upward-sloping curve represents Aggregate Supply.#### Axes:- The horizontal axis indicates **Real Output** (quantity in billions per year).- The vertical axis indicates **Price Level** (average price).#### Key Points:- **AD2 and AS Intersection:** This is the point where the economy is at full employment.- **AD1 Curve:** Shows a lower level of demand, leading to reduced real output.- **AD3 Curve:** Shows a higher level of demand, resulting in increased real output.#### GDP Gap Calculation:- **Full Employment Point:** Occurs where AS = AD2. Questions:- **1. GDP Gap at AD1:** Calculate the difference in output from the full employment level.- **2. GDP Gap at AD3:** Determine the output difference from the full employment level.

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ENGR.ECONOMIC ANALYSIS

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LAS 100 90 X 80 70 110 60 0 320 360 below full-employment; 40 above full-employment; 20 below full-employment; 20 above full-employment; 40 actual; 0 SAS 400 440 480 520 Real GDP (billions of 2007 dollars) Figure 10.3.1 AD Refer to Figure 10.3.1. The economy is at its short-run macroeconomic equilibrium. There is a difference between equilibrium real GDP and potential GDP of $ billion.
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13. Assume that we compute current dollar GDP for 2021Q2 and find that it rose 2% from 2020Q2. But we also find that general prices rose over the same period by the same amount, 2%. Is the country better off, worse off, or about the same when it comes to output? Explain.
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Browser Real GDP Rate of Wage Change Economy A 300 -1.0% Economy B 320 -0.5% Economy C 340 0% Economy D 360 +3.5% Economy E 380 +6.0% TABLE 24-1 Refer to Table 24-1. Which of the following statements best describes the situation facing Economy B? a) There is an inflationary gap of $40 billion and wages are rising. b) There is a recessionary gap of $40 billion and wages are falling slowly. c) There is no output gap and wages are stable. d) There is a recessionary gap of $20 billion and wages are falling slowly. e) There is an output gap of $20 billion and wages are rapidly adjusting.
Suppose that the dynamic aggregate demand curve in Swaziland is determined by the equation M + U-6%. Using this information, draw Swaziland's dynamic aggregate demand curve on the graph. 14 13 12 Aggregate deman 10 8 5 4 3 2 -4 -3 2 1 0 1 2 3 45 678 9 10 Real GDP growth rate
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Table 2.5.4 from BEA What categories of consumption expenditures have the highest inflation rate between 2012 and 2021? Are there any categories for which prices are relatively stanle or cheaper?
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Price level (CPT) 110 105 100 95 AS Ful employment, 50 151 Real GDP AD₁ (trillions of dollars per year) Suppose the economy in Exhibit 11-2 is in equilibrium at point E, and the marginal propensity to consume (MPC) is 0.75. Following Keynesian economics, the federal government can move the economy to full employment at point E₂ by: A increasing government tax revenue by approximately $33 billion. B decreasing government tax revenue by $100 billion. increasing government tax revenue by $100 billion. decreasing government tax revenue by $750 billion. decreasing government tax revenue by approximately $33 billion.

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40 AD3 38 AS 36 - AD 2 34 - 32- AD, 30 28 - 26 24 - 22 - 20 4 10 12 14 18 18 20 Real Output (quantity in billions per year) Suppose the economy is at full employment when AS = AD2. a. The GDP gap when the demand curve is at AD1 is billion Price Level (average price)