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The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with full-employment output of $11 trillion. PRICE LEVEL (CPI) 130 125 120 115 110 105 100 95 90 8.0 8.5 AD₁ 9.0 9.5 10.0 10.5 11.0 REAL GDP (Trillions of dollars) AS 11.5 12.0 641 AD₂ Macro Eq 2 ? the real Suppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantity of real GDP supplied is GDP demanded at a price level of 105, and firms will experience an unplanned in inventories. Firms will respond to the change in inventories by producing and real GDP of output until the economy reaches macroeconomic equilibrium at a price level of The decrease in aggregate demand leads to a movement along the to and the equilibrium level of real GDP to Suppose consumers and businesses become less optimistic about future economic conditions, causing the aggregate demand curve to decrease by $1.5 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 click on AD₁ to see its slope). Then use the purple drop lines (diamond symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. range of the aggregate supply curve, causing the equilibrium price level

The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with full-employment output of $11 trillion. PRICE LEVEL (CPI) 130 125 120 115 110 105 100 95 90 8.0 8.5 AD₁ 9.0 9.5 10.0 10.5 11.0 REAL GDP (Trillions of dollars) AS 11.5 12.0 641 AD₂ Macro Eq 2 ? the real Suppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantity of real GDP supplied is GDP demanded at a price level of 105, and firms will experience an unplanned in inventories. Firms will respond to the change in inventories by producing and real GDP of output until the economy reaches macroeconomic equilibrium at a price level of The decrease in aggregate demand leads to a movement along the to and the equilibrium level of real GDP to Suppose consumers and businesses become less optimistic about future economic conditions, causing the aggregate demand curve to decrease by $1.5 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 click on AD₁ to see its slope). Then use the purple drop lines (diamond symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. range of the aggregate supply curve, causing the equilibrium price level

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter26: The Neoclassical Perspective
Section: Chapter Questions
Problem 21P: Use Table 26.3 to answer the following questions. Sketch an aggregate supply and aggregate demand...
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5. Macroeconomic equilibrium and the ranges of the aggregate supply curve The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with full-employment output of $11 trillion. PRICE LEVEL (CPI) 130 125 120 115 110 105 100 95 90 8.0 8.5 9.0 AD₁ AS 10.0 10.5 11.0 9.5 REAL GDP (Trillions of dollars) 11.5 12.0 A The decrease in aggregate demand leads to a movement along the to and the equilibrium level of real GDP to AD₂ Macro Eq 2 ? Suppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantity of real GDP supplied is GDP demanded at a price level of 105, and firms will experience an unplanned producing output until the economy reaches macroeconomic equilibrium at a price level of the real in inventories. Firms will respond to the change in inventories by and real GDP of Suppose consumers and businesses become less optimistic about future economic conditions, causing the aggregate demand curve to decrease by $1.5 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 click on AD₁ to see its slope). Then use the purple drop lines (diamond symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. range of the aggregate supply curve, causing the equilibrium price level
Transcribed Image Text:5. Macroeconomic equilibrium and the ranges of the aggregate supply curve The following graph shows the aggregate demand (AD₁) and aggregate supply (AS) curves for a hypothetical economy with full-employment output of $11 trillion. PRICE LEVEL (CPI) 130 125 120 115 110 105 100 95 90 8.0 8.5 9.0 AD₁ AS 10.0 10.5 11.0 9.5 REAL GDP (Trillions of dollars) 11.5 12.0 A The decrease in aggregate demand leads to a movement along the to and the equilibrium level of real GDP to AD₂ Macro Eq 2 ? Suppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantity of real GDP supplied is GDP demanded at a price level of 105, and firms will experience an unplanned producing output until the economy reaches macroeconomic equilibrium at a price level of the real in inventories. Firms will respond to the change in inventories by and real GDP of Suppose consumers and businesses become less optimistic about future economic conditions, causing the aggregate demand curve to decrease by $1.5 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 click on AD₁ to see its slope). Then use the purple drop lines (diamond symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. range of the aggregate supply curve, causing the equilibrium price level
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