The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as shown in Table below.. Price Level 100 120 140 160 180 AD 700 600 500 400 300 AS 200 325 500 570 620 a. Plot the AD/AS diagram with the axes labeled. Identify the equilibrium. b. Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. c. How will the shift in AD affect the original output, price level, and employment?

The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as shown in Table below.. Price Level 100 120 140 160 180 AD 700 600 500 400 300 AS 200 325 500 570 620 a. Plot the AD/AS diagram with the axes labeled. Identify the equilibrium. b. Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. c. How will the shift in AD affect the original output, price level, and employment?

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

The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as
shown in Table below.
Price Level
100
120
140
160
180
AD
700
600
500
400
300
AS
200
325
500
570
620
a. Plot the AD/AS diagram with the axes labeled. Identify the equilibrium.
b. Imagine that consumers begin to lose confidence about the state of the economy, and so AD
becomes lower by 275 at every price level. Identify the new aggregate equilibrium.
c. How will the shift in AD affect the original output, price level, and employment?

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