Question

In: Economics

Use the table and graph to answer three questions. Real GDP (in $ Trillions) Price Level...

Use the table and graph to answer three questions.

	Real GDP (in $ Trillions)
Price Level	Supplied	Demanded
100	4	16
110	10	15
140	14	12
200	15	6

Using the table and graph answer the questions

a. What is the equilibrium price level?

b. What is the equilibrium output?

c. If the quantity of output demanded at ever price level increases by $2 trillion, what happens to equilibrium output and prices?

Expert Solution

(a)

Price level	Supplied	Demanded
100	4	16
110	10	15
140	14	12
200	15	6

At equilibrium, supply and demand curve intersect.

Therefore, the equilibrium price level is 130.

(b) equilibrium output is $13 trillion.

(c)

Price level	Supplied	Demanded	New demanded
100	4	16	18
110	10	15	17
140	14	12	14
200	15	6	8

demand will rise by $2 trillion at each price level

It will shift the demand curve rightward.

New equilibrium occurs at the intersection point of new demand curve and supply curve.

Therefore, new equilibrium price is 140 and equilibrium output is $14 trillion.

Rahul Sunny answered 6 months ago

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