The following graph shows the aggregate demand (AD1) and aggregate supply (AS) curves for a hypothetical economy with Natural Real GDP of $11 trillion. PRICE LEVEL 130 125 120+ 115 110 105 100 95 90 + 8.0 8.5 9.0 The Simple Keynesian Model AD₁ AS 9.5 10.0 10.5 11.0 11.5 12.0 REAL GDP (Trillions of dollars) AD₂ + New Eq ? Suppose consumers and businesses become more optimistic about future economic conditions, causing aggregate demand to increase by a total $0.5 trillion at each price level (after all multiplier effects have taken place). On the previous graph, use the green line (triangle symbol) to show the new aggregate demand curve (AD2). Be sure that AD2 is parallel to AD1 (you can mouse over AD₁ to see its slope). Then use the black drop lines (cross symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. The increase in aggregate demand leads to a movement along the level to range of the aggregate supply curve, causing the equilibrium price and the equilibrium level of Real GDP to '
The following graph shows the aggregate demand (AD1) and aggregate supply (AS) curves for a hypothetical economy with Natural Real GDP of $11 trillion. PRICE LEVEL 130 125 120+ 115 110 105 100 95 90 + 8.0 8.5 9.0 The Simple Keynesian Model AD₁ AS 9.5 10.0 10.5 11.0 11.5 12.0 REAL GDP (Trillions of dollars) AD₂ + New Eq ? Suppose consumers and businesses become more optimistic about future economic conditions, causing aggregate demand to increase by a total $0.5 trillion at each price level (after all multiplier effects have taken place). On the previous graph, use the green line (triangle symbol) to show the new aggregate demand curve (AD2). Be sure that AD2 is parallel to AD1 (you can mouse over AD₁ to see its slope). Then use the black drop lines (cross symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. The increase in aggregate demand leads to a movement along the level to range of the aggregate supply curve, causing the equilibrium price and the equilibrium level of Real GDP to '
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section9.A: The Simple Algebra Of Income Determination And The Multiplier
Problem 4TY
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6. Macroeconomic equilibrium and the ranges of the aggregate supply curve
The following graph shows the aggregate demand (AD1AD1) and aggregate supply (AS) curves for a hypothetical economy with Natural Real GDP of $11 trillion.
The Simple Keynesian ModelAD2New Eq8.08.59.09.510.010.511.011.512.01301251201151101051009590PRICE LEVELREAL GDP (Trillions of dollars)ASAD1
Suppose consumers and businesses become more optimistic about future economic conditions, causing aggregate demand to increase by a total $0.5 trillion at each price level (after all multiplier effects have taken place).
On the previous graph, use the green line (triangle symbol) to show the new aggregate demand curve (AD2AD2). Be sure that AD2AD2 is parallel to AD1AD1 (you can mouse over AD1AD1 to see its slope). Then use the black drop lines (cross symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand.
The increase in aggregate demand leads to a movement along the range of the aggregate supply curve, causing the equilibrium price level to , and the equilibrium level of Real GDP to .
Transcribed Image Text:The following graph shows the aggregate demand (AD1) and aggregate supply (AS) curves for a hypothetical economy with Natural Real GDP of $11
trillion.
PRICE LEVEL
130
125
120+
115
110
105
100
95
90
+
8.0
8.5
9.0
The Simple Keynesian Model
AD₁
AS
9.5
10.0
10.5 11.0
11.5
12.0
REAL GDP (Trillions of dollars)
AD₂
+
New Eq
?
Suppose consumers and businesses become more optimistic about future economic conditions, causing aggregate demand to increase by a total $0.5
trillion at each price level (after all multiplier effects have taken place).
On the previous graph, use the green line (triangle symbol) to show the new aggregate demand curve (AD2). Be sure that AD2 is parallel to
AD1 (you can mouse over AD₁ to see its slope). Then use the black drop lines (cross symbol) to indicate the new macroeconomic equilibrium after
the shift of aggregate demand.
The increase in aggregate demand leads to a movement along the
level to
range of the aggregate supply curve, causing the equilibrium price
and the equilibrium level of Real GDP to
'
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