Plot an AD/AS diagram from the data above. Identify the equilibrium. Would you expect unemployment in this economy to be relatively high or low? Would you expect concern about inflation in this economy to be relatively high or low? Imagine that consumers begin to lose confidence about the state of the economy, so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. How will the shift in AD affect the original output, price level, and employment?
The imaginary country of Jasa Island has the
Price level Aggregate demand Aggregate supply
100 700 200
120 600 325
140 500 500
160 400 570
180 300 620
REQUIREMENTS:
- Plot an AD/AS diagram from the data above. Identify the equilibrium.
- Would you expect
unemployment in this economy to be relatively high or low? Would you expect concern about inflation in this economy to be relatively high or low? - Imagine that consumers begin to lose confidence about the state of the economy, so AD becomes lower by 275 at every price level.
- Identify the new aggregate equilibrium. How will the shift in AD affect the original output, price level, and employment?
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