Refer to the table below. Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 Instructions: Enter your anwers as whole numbers. A). What is the equilibrium level of output? What is the equilibrium price level? B). Suppose that aggregate demand increases such that the amount of real output demanded rises by $ 7 billion at each price level. Insert the new values for real output demanded in the table below. Real Output Demanded, Billions New Real Output Demanded, Billions Price Level Real Output Supplied, Billions $ 506 108 $ 513 508 104 512 510 100 510 512 96 507 514 92 502 What is the new equilibrium level of output? What is the new equilibrium price level? By what percentage will the price level increase? Will this inflation be demand-pull inflation or will it be cost-push inflation? C) If potential real GDP ( that is, full-employment GDP) is $ 510 billion, what will be the size of the positive GDP gap after the change in aggregate demand? If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase governmnet spending or decrease it?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Refer to the table below.

Real Output Demanded, Billions	Price Level	Real Output Supplied, Billions
$ 506	108	$ 513
508	104	512
510	100	510
512	96	507
514	92	502

Instructions: Enter your anwers as whole numbers.

A). What is the equilibrium level of output? What is the equilibrium price level?

B). Suppose that aggregate demand increases such that the amount of real output demanded rises by $ 7 billion at each price level. Insert the new values for real output demanded in the table below.

Real Output Demanded, Billions	New Real Output Demanded, Billions	Price Level	Real Output Supplied, Billions
$ 506		108	$ 513
508		104	512
510		100	510
512		96	507
514		92	502

What is the new equilibrium level of output?

What is the new equilibrium price level?

By what percentage will the price level increase?

Will this inflation be demand-pull inflation or will it be cost-push inflation?

C) If potential real GDP ( that is, full-employment GDP) is $ 510 billion, what will be the size of the positive GDP gap after the change in aggregate demand?

If government wants to use fiscal policy to counter the resulting inflation without changing tax rates, would it increase governmnet spending or decrease it?

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