Draw the aggregate demand and short-run aggregate supply curves. What is the initial real GDP? What is the initial price level? What kind of gap, if any, exists?
Draw the aggregate demand and short-run aggregate supply curves. What is the initial real GDP? What is the initial price level? What kind of gap, if any, exists?
Chapter1: Making Economics Decisions
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Transcribed Image Text:2. Suppose an economy is described by the following aggregate demand and short-run aggregate supply curves. The potential level of output is $10 trillion.
Aggregate Quantity of Goods and Services
Price Level
Demanded
Supplied
3.0
$11.0 trillion
$9.0 trillion
3.4
$10.8 trillion
$9.2 trillion
3.8
$10.6 trillion
$9.4 trillion
4.2
$10.4 trillion
$9.6 trillion
4.6
$10.2 trillion
$9.8 trillion
5.0
$10.0 trillion
$10.0 trillion
5.4
$9.8 trillion
$10.2 trillion
5.8
$9.6 trillion
$10.4 trillion
6.2
$9.4 trillion
$10.6 trillion
6.6
$9.2 trillion
$10.8 trillion
7.0
$9.0 trillion
$11.0 trillion
Draw the aggregate demand and short-run aggregate supply curves.
What is the initial real GDP?
What is the initial price level?
What kind of gap, if any, exists?
After the increase in health-care costs, each level of real GDP requires an increase in the price level of o.8. For
example, producing $9.0 trillion worth of goods and services now requires a price level of 3.8. What is the short-
run equilibrium level of real GDP?
After the health-care cost increase, what is the new equilibrium price level in the short run?
What sort of gap, if any, now exists?
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