The following graph shows the aggregate demand (AD1) and aggregate supply (AS) curves for a hypotheticaleconomy with full-employment output of $11 trillion.PRICE LEVELof13012512011511010510095908.0 8.5 9.0AD1ASAD2Macro Eq 29.5 10.0 10.5 11.0 11.5 12.0REAL GDP (Trillions of dollars) HelpClear AllSuppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantityof real GDP supplied isthe real GDP demanded at a price level of 105, and firms will experiencean unplannedin inventories. Firms will respond to the change in inventories by producingoutput until the economy reaches macroeconomic equilibrium at a price level ofand real GDPSuppose consumers and businesses become more optimistic about future economic conditions, causing the aggregatedemand curve to increase by $0.5 trillion at each price level. Use the green line (triangle symbols) to show the newaggregate demand curve (AD2). Be sure that AD2 is parallel to AD1 (you can hover your cursor over AD1 to see itsslope). Then use the red drop lines (cross symbol) to indicate the new macroeconomic equilibrium after the shift ofaggregate demand.The increase in aggregate demand leads to a movement along thecurve, causing the equilibrium price level torange of the aggregate supplyand the equilibrium level of real GDP to

The following graph shows the aggregate demand (AD1) and aggregate supply (AS) curves for a…

Suppose consumers and businesses become more optimistic about future economic conditions, causing the aggregate demand curve to increase by $0.5 trillion at each price level. Use the green line (triangle symbols) to show the new aggregate demand curve (AD2). Be sure that AD2 is parallel to AD1 (you can hover your cursor over AD1 to see its slope). Then use the red drop lines (cross symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand.

Suppose consumers and businesses become more optimistic about future economic conditions, causing the aggregate demand curve to increase by $0.5 trillion at each price level. Use the green line (triangle symbols) to show the new aggregate demand curve (AD2). Be sure that AD2 is parallel to AD1 (you can hover your cursor over AD1 to see its slope). Then use the red drop lines (cross symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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