Price Lev3020100200 250 300 350 400 450 500 550 600 650 700QFReal Output (in $ billions per year)ADInstructions: Enter your responses as a whole number.a. What is the new equilibrium level of real output?$ 400 billionb. How large is the real GDP gap?100 billionc. Did average prices increase or decrease?O Increase• Decrease Assume that the economy is at full-employment equilibrium at point A. Using thefollowing graph as a reference, calculate the impact of a sudden decline in consumerconfidence that reduces autonomous consumption by $200 billion at the price level Pf.Assume MPC = 0.5.Price Level (average price)10090807060F5040AS3020100200 250 300 350 400 450 500 550 600 650 700QFReal Output (in $ billions per year)ADInstructions: Enter your responses as a whole number.

Macroeconomics examines the working, composition, and dynamics of an economy. AD/AS model is used…

Answered: a. What is the new equilibrium level of…

a. What is the new equilibrium level of real output? 400 billion b. How large is the real GDP gap? 100 billion c. Did average prices increase or decrease? Increase Decrease

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

Price Lev
30
20
10
0
200 250 300 350 400 450 500 550 600 650 700
QF
Real Output (in $ billions per year)
AD
Instructions: Enter your responses as a whole number.
a. What is the new equilibrium level of real output?
$ 400 billion
b. How large is the real GDP gap?
100 billion
c. Did average prices increase or decrease?
O Increase
• Decrease

Assume that the economy is at full-employment equilibrium at point A. Using the
following graph as a reference, calculate the impact of a sudden decline in consumer
confidence that reduces autonomous consumption by $200 billion at the price level Pf.
Assume MPC = 0.5.
Price Level (average price)
100
90
80
70
60
F50
40
AS
30
20
10
0
200 250 300 350 400 450 500 550 600 650 700
QF
Real Output (in $ billions per year)
AD
Instructions: Enter your responses as a whole number.

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Step 2: a. Calculate the new equilibrium level of real output:

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Step 3: b. Compute the real GDP gap:

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