Use the following information to draw aggregate demand (AD) andaggregate supply (AS) curves on the...

Use the following information to draw aggregate demand (AD) and aggregate supply (AS) curves on the following graph.

Price Level	Output Demanded (Aggregate Demand)	Output Supplied (Aggregate Supply)
800	0	$800
100	$700	100

Instructions: Use the tools provided 'AD' and 'AS' to plot the aggregate demand (AD) and aggregate supply (AS) curves. Plot only the endpoints of each line (plot 2 points for each line—4 points total). Both curves are drawn to be straight lines.

Aggregate Supply and Demand Tools Price Level (average price) Real Output (quantity per year)

Instructions: Enter your response as a whole number.

a. What is the equilibrium price level?

b. What curve would have shifted if a new equilibrium were to occur at an output level of 700 and a price level of $700?

AD shifts to the left.
AS shifts to the left.
AD shifts to the right.
AS shifts to the right.

c. What curve would have shifted if a new equilibrium were to occur at an output level of 200 and a price level of $600?

AD shifts to the right.
AD shifts to the left.
AS shifts to the right.
AS shifts to the left.

Solutions

Expert Solution

a. Equilibrium price = 400

b. AD shifts to the right.

Reason: When AD shifts to the right (with AS fixed), it increases both price and quantity in equilibrium.

c. AS shifts to the left.

Reason: When AS shifts to the left (with AD fixed), it decreases quantity and increases price in equilibrium.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Use the following information to draw aggregate demand (AD) and aggregate supply (AS) curves on the following graph.

Use the following information to draw aggregate demand (AD) and aggregate supply (AS) curves on the following graph. a. What is the equilibrium price level? b. What curve would have shifted if a new equilibrium were to occur at an output level of 450 and a price level of $450? AD shifts to the right AD shifts to the left AS shifts to the right AS shifts to the left c. What curve would have shifted if a new equilibrium were to occur at an output level...

Aggregate Supply (AS) and Aggregate Demand (AD) model and AS/AD curves are essential to understand macroeconomic...

Aggregate Supply (AS) and Aggregate Demand (AD) model and AS/AD curves are essential to understand macroeconomic fluctuations (business cycles). Discuss the importance AS-AD model in explaining the macroeconomic conditions of the economy and business cycles like recessions. What factors shift AS and AD curves? How do you explain macroeconomic fluctuations using AS-AD model and AS/AD curves?

Draw supply and demand curves. Assume that these are the supply and demand curves for the...

Draw supply and demand curves. Assume that these are the supply and demand curves for the Microsoft Surface tablet. Draw what happens on this graph when the price of iPads decreases. Surface tablets and iPads are substitute goods. Clearly illustrate and label all equilibrium points, prices, and quantities.

Draw an aggregate demand (AD)/aggregate supply (AS) graph to illustrate an economy experiencing a recession. Label...

Draw an aggregate demand (AD)/aggregate supply (AS) graph to illustrate an economy experiencing a recession. Label all curves and axes. Also explain, The monetary policy you would use to eliminate the recession you illustrated above, what are the policy impacts on real GDP, employment, and price level? Draw an economy in an economic bubble and explain the fiscal policy you would use to get it out. If the policy you implemented in (c) above succeeds, what is likely to happen...

Aggregate Demand and Aggregate Supply Assume Broncoland has the following aggregate demand (AD) and short-run aggregate...

Aggregate Demand and Aggregate Supply Assume Broncoland has the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Price Level Aggregate Demand Short-Run Aggregate Supply 120 8250 9700 115 8300 9750 110 8400 9700 105 8500 9600 100 8600 9500 95 8700 9300 90 8800 8800 85 8900 8000 80 9100 7000 Return to the original values of aggregate demand and short-run aggregate supply. Assume the long-run full-employment level of output (often called either potential GDP or the natural...

Question 3. Explain the effects of the following events on Aggregate Demand or Aggregate Supply curves...

Question 3. Explain the effects of the following events on Aggregate Demand or Aggregate Supply curves (AD/ SAS decreases or increases) - Specify the shift in AD/SAS curve and indicate what happens to the equilibrium price level and RGDP (a). An increase in Government Spending (b). Political conflicts leading business owners to become pessimistic about business's profitability (c). An earthquake was large enough to cause a cut back in the supply of fuel (d). A 5% tax is placed on...

ESSAY 1. Draw the Phillips curve. Use the model of aggregate demand and aggregate supply to...

ESSAY 1. Draw the Phillips curve. Use the model of aggregate demand and aggregate supply to show how policy can move the economy from a point on this curve with high inflation to a point with low inflation. 2. Does inflation and unemployment would be related in the long run? Give your explanation and draw the graph. 3. Suppose there is a tornado in western Oklahoma, causing a supply shock for wheat. What will happen in aggregate demand and aggergate...

Consider the Aggregate Demand (AD)-Aggregate Supply (AS) model studied in class. The AD function is composed...

Consider the Aggregate Demand (AD)-Aggregate Supply (AS) model studied in class. The AD function is composed of the following elements: ? = ? + ??? ∙ (? − ?); ? = ? − ?; ? = ?; ?? = ?∗ − ?; ? = ? + ? ∙ ? The AS is given by the function: ? = 4, (a) Assume that the economy is in its very short-run equilibrium with the following values: ? = ? = 0; ?...

Distinguish between demand-pull inflation and cost-push inflation and then use an AD-AS (aggregate demand/aggregate supply) model...

Distinguish between demand-pull inflation and cost-push inflation and then use an AD-AS (aggregate demand/aggregate supply) model to illustrate the theoretical effects of these two types of inflation on the price level (P), employment (L) and economic growth (real GDP) in the short run. Now identify the various factors that have contributed towards demand-pull inflation and cost-push inflation in South Africa and critically analyse whether they are consistent with the predictions of the AD-AS model.

Distinguish between demand-pull inflation and cost-push inflation and then use an AD-AS (aggregate demand/aggregate supply) model...

Distinguish between demand-pull inflation and cost-push inflation and then use an AD-AS (aggregate demand/aggregate supply) model to illustrate the theoretical effects of these two types of inflation on the price level (P), employment (L) and economics growth (real GDP) in the short run. Now identify the various factors that have contributed towards demand-pull inflation and cost-push inflation in South Africa and critically analyse whether they are consistent with the predictions of the AD-AS model

Subjects