Refer to the above diagram. Assume aggregate demand increased from AD1 to AD2. As a result of the shift, actual GDP and the price level O Increased; increased. O Decreased; decreased. O Increased; decreased. O Decreased, increased. O None of these are true.

Refer to the above diagram. Assume aggregate demand increased from AD1 to AD2. As a result of the shift, actual GDP and the price level O Increased; increased. O Decreased; decreased. O Increased; decreased. O Decreased, increased. O None of these are true.

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

100%

Real Domestic Output, GDP
Refer to the above diagram. Assume aggregate demand increased from
AD1 to AD2. As a result of the shift, actual GDP
___and the price
level
O Increased; increased.
O Decreased; decreased.
O Increased; decreased.
O Decreased, increased.
O None of these are true.

Price Level
AD2
LRAS
AD,
AD,
PA
W
SRAS
P,
P2
P,
Po
Qo
Q,
Q, Q3
Real Domestic Output, GDP
Refer to the above diagram. Assume aggregate demand increased from
and the price
AD1 to AD2. As a result of the shift, actual GDP
level

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Other things being equal, what would happen to aggregate demand if the federal government decreased military purchases and state and local governments increased their road building budgets at the same time? O aggregate demand (AD) would increase, because only federal government purchases affect AD. aggregate demand (AD) would decrease, because only state and local government purchases affect AD. aggregate demand (AD) would increase if the change in federal purchases were smaller than the change in state and local purchases. O aggregate demand (AD) would decrease if the change in federal purchases was smaller than the change in state and local purchases.
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Assume that the accompanying graph depicts aggregate supply and demand conditions in an economy. Full employment occurs when $5 trillion of real output is produced. The economy is currently in equilibrium at point A. Price Level (average price) 260 240 220 200 180 160 140 120 100 0 1 A AS₁ 2 3 4 5 6 7 AD₁ Real Output (in trillions of dollars per year) 8 Tools EQ Instructions: In parts a, b, and d, enter your responses as a whole number. a. What is the equilibrium rate of output? $ trillion per year b. How far short of full employment is the equilibrium rate of output? $ trillion c. On the graph, illustrate a shift of aggregate demand that would change the equilibrium rate of output to $5 trillion. Instructions: Shift the aggregate demand curve (AD1) such that the equilibrium in the macro model is at $5 trillion. Then use the tool provided 'EQ' to label the new equilibrium. d. What is the price level at this full-employment equilibrium?
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