5. Macroeconomic equilibrium and the ranges of the aggregate supply curve The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with full-employment output of $11 trillion. 130 AD 120 + 115 LI 110 105 PRICE LEVEL (CPI) 125 100 95 8 90 8.0 8.5 AS 9.0 9.5 10.0 10.5 11.0 REAL GDP (Trillions of dollars) 11.5 12.0 AD₂ Macro Eq 2 Suppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantity of real GDP supplied is in inventories. Firms will the real GDP demanded at a price level of 105, and firms will experience an unplanned. and real respond to the change in inventories by producing output until the economy reaches macroeconomic equilibrium at a price level of GDP of M. The decrease in aggregate demand leads to a movement along the price level to Suppose consumers and businesses become less optimistic about future economic conditions, causing the aggregate demand curve to decrease by $1.5 trillion at each price level. Use the green line (triangle symbols) to show the new aggregate demand curve (AD2). Be sure that AD₂ is parallel to AD₁ (you can click on AD₁ to see its slope). Then use the purple drop lines (diamond symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. and the equilibrium level of real GDP to range of the aggregate supply curve, causing the equilibrium
5. Macroeconomic equilibrium and the ranges of the aggregate supply curve The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with full-employment output of $11 trillion. 130 AD 120 + 115 LI 110 105 PRICE LEVEL (CPI) 125 100 95 8 90 8.0 8.5 AS 9.0 9.5 10.0 10.5 11.0 REAL GDP (Trillions of dollars) 11.5 12.0 AD₂ Macro Eq 2 Suppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantity of real GDP supplied is in inventories. Firms will the real GDP demanded at a price level of 105, and firms will experience an unplanned. and real respond to the change in inventories by producing output until the economy reaches macroeconomic equilibrium at a price level of GDP of M. The decrease in aggregate demand leads to a movement along the price level to Suppose consumers and businesses become less optimistic about future economic conditions, causing the aggregate demand curve to decrease by $1.5 trillion at each price level. Use the green line (triangle symbols) to show the new aggregate demand curve (AD2). Be sure that AD₂ is parallel to AD₁ (you can click on AD₁ to see its slope). Then use the purple drop lines (diamond symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. and the equilibrium level of real GDP to range of the aggregate supply curve, causing the equilibrium
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:5. Macroeconomic equilibrium and the ranges of the aggregate supply curve
The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with full-employment output.
of $11 trillion.
PRICE LEVEL (CPI)
130
125-
120
115
110
105
100
95
90
+
8.0
8.5
AD₁
AS
9.0
10.5
9.5 10,0
REAL GDP (Trillions of dollars)
11.0
11.5
12.0
AD₂
Macro Eq 2
Suppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantity of real GDP supplied is
the real GDP demanded at a price level of 105, and firms will experience an unplanned
respond to the change in inventories by producing
GDP of
in inventories. Firms will
output until the economy reaches macroeconomic equilibrium at a price level of and real
The decrease in aggregate demand leads to a movement along the
price level to
Suppose consumers and businesses become less optimistic about future economic conditions, causing the aggregate demand curve to decrease by
$1.5 trillion at each price level. Use the green line (triangle symbols) to show the new aggregate demand curve (AD2). Be sure that AD₂ is parallel
to AD₁ (you can click on AD₁ to see its slope). Then use the purple drop lines (diamond symbol) to indicate the new macroeconomic equilibrium
after the shift of aggregate demand.
Y and the equilibrium level of real GDP to
range of the aggregate supply curve, causing the equilibrium
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