8. Suppose that aggregate demand and supply for a hypothetical economy are as shown: P TITIX Amount of real Price Amount rea AS GDP supplie billions GDP level demanded, (price index) billions 100 300 450 200 250 400 AD' 300 200 300 AD 400 150 200 500 100 100 Real 100 200 300 400 GDP Use these sets of data to graph the aggregate demand and aggregate supply curves. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Equilibrium price level = Is the equilibrium real output also necessarily the full-capacity real output? ( Yes, No The full-capacity level of GDP is more lil cut ' at $_ а. Equilibrium real output = $_ billion billion. b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250? At a price level of 150, real GDP supplied is a maximum of $ the real GDP demanded of $ price level up. At a price level of 250, real GDP supplied is $400 billion, which is more than the real GDP demanded of $200 billion. The (shortage, surplus) of real output will drive down the price level. Equilibrium occurs at the price level at which AS and AD intersect. billion, (more, less ) than billion. The (shortage, surplus) of real output will drive the c. Suppose that buyers desire to purchase $200 billion of extra real domestic output at each price level. Sketch in the new aggregate demand curve as AD1. (It is drawn on the graph above with a dashed line.) What factors (determinants or shifters) might cause this change in aggregate demand? (Increases, Decreases) in consumer, investment, government, or net export spending might shift the AD curve rightward from AD to AD'. New equilibrium price level New equilibrium GDP = $ billion. %3D

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
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Chapter1: Making Economics Decisions
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**Text Transcription:**

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Suppose that aggregate demand and supply for a hypothetical economy are as shown:

| Amount of real GDP demanded, billions | Price level (price index) | Amount real GDP supplied, billions |
|---------------------------------------|---------------------------|-----------------------------------|
| 100                                   | 300                       | 450                               |
| 200                                   | 250                       | 400                               |
| 300                                   | 200                       | 300                               |
| 400                                   | 150                       | 200                               |
| 500                                   | 100                       | 100                               |

**Graph Explanation:**

The graph displays aggregate demand (AD) and aggregate supply (AS) curves, with price level (P) on the vertical axis and real GDP on the horizontal axis. The aggregate demand curve (AD) is downward sloping, whereas the aggregate supply curve (AS) is upward sloping. An alternative aggregate demand curve (AD') is shown as a dashed line, which is shifted to the right of the original AD curve. The intersection of the AD and AS curves is marked with a red dot, indicating the equilibrium price level and output.

**Questions:**

a. Use these sets of data to graph the aggregate demand and aggregate supply curves. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy?
- Equilibrium price level = ______ Equilibrium real output = $__________ billion
- Is the equilibrium real output also necessarily the full-capacity real output? ( Yes, No )
- The full-capacity level of GDP is more \(full cut \) at $________ billion.

b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250?
- At a price level of 150, real GDP supplied is a maximum of $________ billion, (more, less) than the real GDP demanded of $________ billion. The (shortage, surplus) of real output will drive the price level up. At a price level of 250, real GDP supplied is $400 billion, which is more than the real GDP demanded of $200 billion. The (shortage, surplus) of real output will drive down the price level. Equilibrium occurs at the price level at which AS and AD intersect.

c. Suppose that buyers desire to purchase $200 billion of extra real domestic output at each price level. Sketch in the new aggregate demand curve as AD1. (
Transcribed Image Text:**Text Transcription:** --- Suppose that aggregate demand and supply for a hypothetical economy are as shown: | Amount of real GDP demanded, billions | Price level (price index) | Amount real GDP supplied, billions | |---------------------------------------|---------------------------|-----------------------------------| | 100 | 300 | 450 | | 200 | 250 | 400 | | 300 | 200 | 300 | | 400 | 150 | 200 | | 500 | 100 | 100 | **Graph Explanation:** The graph displays aggregate demand (AD) and aggregate supply (AS) curves, with price level (P) on the vertical axis and real GDP on the horizontal axis. The aggregate demand curve (AD) is downward sloping, whereas the aggregate supply curve (AS) is upward sloping. An alternative aggregate demand curve (AD') is shown as a dashed line, which is shifted to the right of the original AD curve. The intersection of the AD and AS curves is marked with a red dot, indicating the equilibrium price level and output. **Questions:** a. Use these sets of data to graph the aggregate demand and aggregate supply curves. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? - Equilibrium price level = ______ Equilibrium real output = $__________ billion - Is the equilibrium real output also necessarily the full-capacity real output? ( Yes, No ) - The full-capacity level of GDP is more \(full cut \) at $________ billion. b. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250? - At a price level of 150, real GDP supplied is a maximum of $________ billion, (more, less) than the real GDP demanded of $________ billion. The (shortage, surplus) of real output will drive the price level up. At a price level of 250, real GDP supplied is $400 billion, which is more than the real GDP demanded of $200 billion. The (shortage, surplus) of real output will drive down the price level. Equilibrium occurs at the price level at which AS and AD intersect. c. Suppose that buyers desire to purchase $200 billion of extra real domestic output at each price level. Sketch in the new aggregate demand curve as AD1. (
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