Aggregate demand curve of an economy is given by AD = 50 - 0.2P, the long-run aggregate supply. LRAS, is 30 and the short-run aggregate supply is given by SRAS = 0.3 P (all output measures are in US$ billions and the price level is given as an index number). A negative demand shock shifts the aggregate demand curve to the left. The new AD curve is given by AD = 49 - 0.2P. Find the new short-run equilibrium. Find the output gap as a percentage. What is the unemployment rate based on Okun's Law if the natural rate of unemployment is 4%? Short-run equilibrium: Price level is and the output is US$ billions Output gap as a percentage is: %. Unemployment rate is: %.

Aggregate demand curve of an economy is given by AD = 50 - 0.2P, the long-run aggregate supply. LRAS, is 30 and the short-run aggregate supply is given by SRAS = 0.3 P (all output measures are in US$ billions and the price level is given as an index number). A negative demand shock shifts the aggregate demand curve to the left. The new AD curve is given by AD = 49 - 0.2P. Find the new short-run equilibrium. Find the output gap as a percentage. What is the unemployment rate based on Okun's Law if the natural rate of unemployment is 4%? Short-run equilibrium: Price level is and the output is US$ billions Output gap as a percentage is: %. Unemployment rate is: %.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Aggregate demand curve of an economy is given by AD = 50 - 0.2P, the long-run aggregate supply,
LRAS, is 30 and the short-run aggregate supply is given by SRAS = 0.3 P (all output measures are in
US$ billions and the price level is given as an index number).
A negative demand shock shifts the aggregate demand curve to the left. The new AD curve is given
by AD = 49 - 0.2P. Find the new short-run equilibrium. Find the output gap as a percentage. What is
the unemployment rate based on Okun's Law if the natural rate of unemployment is 4%?
Short-run equilibrium: Price level is
and the output is US$ billions
Output gap as a percentage is:
%.
Unemployment rate is:
%.

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