On the following graph, plot the aggregate demand curve that results from varying the price level from 110 to 130 to 150, holding all else equal. Hint: Real income and the quantity of output are equivalent. For example, a real income of $100 billion is the same as a quantity of output of $100 billion. PRICE LEVEL 160 150 140 130 120 110 + 100 90 0 200 300 400 500 600 QUANTITY OF OUTPUT (Billions of dollars) 100 700 800 O Aggregate Demand (AD) ?
On the following graph, plot the aggregate demand curve that results from varying the price level from 110 to 130 to 150, holding all else equal. Hint: Real income and the quantity of output are equivalent. For example, a real income of $100 billion is the same as a quantity of output of $100 billion. PRICE LEVEL 160 150 140 130 120 110 + 100 90 0 200 300 400 500 600 QUANTITY OF OUTPUT (Billions of dollars) 100 700 800 O Aggregate Demand (AD) ?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please answer everything in the photos including the graph.
Transcribed Image Text:On the following graph, plot the aggregate demand curve that results from varying the price level from 110 to 130 to 150, holding all else equal.
Hint: Real income and the quantity of output are equivalent. For example, a real income of $100 billion is the same as a quantity of output of $100
billion.
PRICE LEVEL
160
150
140
130
120 +
110
100
90
0
200
300
400
500 600 700
QUANTITY OF OUTPUT (Billions of dollars)
100
800
O
Aggregate Demand (AD)
?
Transcribed Image Text:The following graph plots three planned expenditure lines for a hypothetical economy, each associated with a different price level. The line labeled
PE130 corresponds to a price level of 130; the line labeled PE110 corresponds to a price level of 110; and the line labeled PE150 corresponds to a
price level of 150. The graph also includes the 45-degree line that plots all points at which planned expenditure equals real income.
PLANNED EXPENDITURES (Billions of dollars)
800
700
600 +
500
400
300
200
100
0
0
100
200
400
500
600
300
REAL INCOME (Billions of dollars)
At a price level of 110, the level of equilibrium output is
PE (P=110)
PE (P=130)
PE (P=150)
700
800
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