### Understanding Economic Equilibrium: Aggregate Demand and Short-Run Aggregate SupplyConsider an economy with the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Decision-makers have previously made decisions anticipating that the price level during the current period will be \( P^{105} \).#### Data Table:| Price Level | \( AD^{105} \) | \( SRAS^{105} \) ||-------------|----------------|-----------------|| 90 | 6,300 | 4,500 || 95 | 6,000 | 4,800 || 100 | 5,700 | 5,100 || 105 | 5,400 | 5,400 || 110 | 5,100 | 5,700 || 115 | 4,800 | 6,000 |#### Questions:a. **Indicate the quantity of GDP that will be produced during the period.** - At the anticipated price level \( P = 105 \), the quantities of GDP demanded and supplied are equal at 5,400. Thus, the GDP produced during the period will be 5,400.b. **Is it a long-run equilibrium level of GDP? Why or why not?** - In the long run, equilibrium occurs where the aggregate demand curve intersects both the short-run and long-run aggregate supply curves. For the provided data, the GDP level of 5,400 at \( P = 105 \), matches both AD and SRAS, suggesting it could represent a short-run equilibrium. However, whether it represents a long-term equilibrium would require additional information about the economy's long-run aggregate supply schedule.c. **How will the unemployment rate during the current period compare with the natural rate of unemployment?** - If the GDP level of 5,400 is indeed the full-employment level of output, then the unemployment rate would coincide with the natural rate of unemployment. If the equilibrium occurs at the full-employment GDP, the economy is not facing cyclical unemployment, only the natural rate of unemployment persists.d. **Will the current rate of GDP be sustainable into the future? Why or why not?** - Sustainability of the current GDP rate into the future depends on whether this level represents long-run equilibrium. If the equilibrium at \( P = 105

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Consider an economy with the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Decision-makers have previously made decisions anticipat- ing that the price level during the current period will be p 105° a. Indicate the quantity of GDP that will be produced during the period.

Consider an economy with the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Decision-makers have previously made decisions anticipat- ing that the price level during the current period will be p 105° a. Indicate the quantity of GDP that will be produced during the period.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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