Suppose the Aggregate Demand and Supply schedules for a hypothetical economy are as shown below: Amount...

Suppose the Aggregate Demand and Supply schedules for a hypothetical economy are as shown below:

Amount of Real Domestic Price Level Amount of Real Domestic

Output Demanded (billions) (Price Index) Output Supplied (billions)

$200 300 $800

$400 250 $800

$600 200 $600

$800 150 $400

$1,000 100 $200

Use the data to graph the Aggregate Demand and Aggregate Supply curves.
What will be the equilibrium price and output levels in this hypothetical economy? Is it also the full employment level of output? Explain.
Why won’t 150 be the equilibrium price level? Why won’t 250 be the equilibrium price level? Explain.
Suppose demand increases by $400 billion at each price level. What will be the new equilibrium price and output levels? Explain and show on the graph.
What factors might cause the Aggregate Demand to increase as in question 4? Explain.

Expert Solution

Rahul Sunny answered 2 years ago

The table below shows aggregate demand and aggregate supply schedules in a hypothetical economy, Acadia. Aggregate...

The table below shows aggregate demand and aggregate supply schedules in a hypothetical economy, Acadia. Aggregate Demand and Aggregate Supply Schedules for Acadia Real GDP (AD0) (AD1) (AS0) (AS1) Price Level (2012 = 100) (2012 $ billions) 125 180 205 220 245 120 190 215 215 240 115 200 225 200 225 110 210 235 185 210 105 220 245 165 190 a. Draw a graph showing Acadia's AD0, AD1, AS0 and AS1. Using the tools given below plot only...

Scenario: Suppose an economy is in equilibrium. a) Using aggregate demand and aggregate supply, illustrate the...

Scenario: Suppose an economy is in equilibrium. a) Using aggregate demand and aggregate supply, illustrate the equilibrium. Do not forget to include the long-run aggregate supply. b) Now suppose the central bank decided to increase the money supply in the economy. Using the theory of liquidity preference and the money market graph, illustrate what is going to happen to the aggregate demand. c) Draw the new short-run equilibrium of the economy, as a result of the shift in aggregate demand...

The table below shows aggregate values for a hypothetical economy. Suppose that this economy has real...

The table below shows aggregate values for a hypothetical economy. Suppose that this economy has real GDP equal to potential output. Potential GDP $2500 Net Tax Revenues $50 Government Purchases $200 Investment $100 Consumption $2350 Net Exports -$135 TABLE 26-1 Refer to Table 26-1. What is the level of private saving for this economy? Question 2 options: A) $50 B) $300 C) $150 D) $100 E) $200

Suppose the economy starts at point 1 in the aggregate supply–aggregate demand (AS-AD) graph and at...

Suppose the economy starts at point 1 in the aggregate supply–aggregate demand (AS-AD) graph and at point A on the Phillips curve graph. Points 2 and 3 start out stacked on point 1, but they will need to be moved to the proper locations that reflect steps 2 and 3 described below. Likewise for points B and C. The AS-AD graph reflects two aggregate demand curves (AD1 and AD2), the long-run aggregate supply curve (LAS) and two short-run aggregate supply...

Question 1: Suppose an economy is in equilibrium. a) Using aggregate demand and aggregate supply, illustrate...

Question 1: Suppose an economy is in equilibrium. a) Using aggregate demand and aggregate supply, illustrate the equilibrium. Do not forget to include the long-run aggregate supply. b) Now suppose the central bank decided to increase the money supply in the economy. Using the theory of liquidity preference and the money market graph, illustrate what is going to happen to the aggregate demand. c) Draw the new short-run equilibrium of the economy, as a result of the shift in aggregate...

The aggregate-demand (AD), short-run aggregate supply (AS), and long-run aggregate-supply (ASLR) schedules are as follows. The...

The aggregate-demand (AD), short-run aggregate supply (AS), and long-run aggregate-supply (ASLR) schedules are as follows. The schedules show the GDP price deflator (P) versus real GDP (Q), with Q measured in trillions of constant dollars. P AD AS ASLR 80 30 22 30 90 28 24 30 100 26 26 30 110 24 28 30 120 22 30 30 130 20 32 30 1. GRAPHS: Graph the AD, AS, and ASLR curves in the same diagram. Be sure to label...

1.create an aggregate demand and aggregate supply model below to explain changes in the economy as...

1.create an aggregate demand and aggregate supply model below to explain changes in the economy as a result of covid-19. 2. how will the cares act affect the U.S. Economy, including changes in fiscal policy, proce level, AD, real GDP and unemployment. INCLUDE A MODEL GRAPH. 3. explain the impaxt of the CARES Act on the Federal Budget.

2. Fiscal policy Suppose a hypothetical economy is currently in a situation of deficient aggregate demand...

2. Fiscal policy Suppose a hypothetical economy is currently in a situation of deficient aggregate demand of $16 billion. Four economists agree that expansionary fiscal policy can increase total spending and move the economy out of recession, but they are debating which type of expansionary policy should be used. Economist A believes that the government spending multiplier is 4 and the tax multiplier is 2. Economist B believes that the government spending multiplier is 2 and the tax multiplier is...

1. Using the Aggregate Demand-Aggregate Supply logic of Chapter 10, suppose that at first, the economy...

1. Using the Aggregate Demand-Aggregate Supply logic of Chapter 10, suppose that at first, the economy is at long-run equilibrium, on both the short-run and long-run aggregate supply curves (in other words, unemployment is at the Natural Rate of Unemployment). Then, government spending rises with no change in taxes. A. What happens in the short-run to output (Y) and the prices of goods? Explain why using Aggregate Demand and Supply logic (you don’t need to draw the graphs unless you...

Refer to the table given below. Suppose that aggregate demand increases such that the amount of...

Refer to the table given below. Suppose that aggregate demand increases such that the amount of real output demanded rises by $7 billion at each price level. Real Output Demanded (Original) Price Level Real Output Supplied $506 110 $513 508 105 512 510 100 510 512 95 507 514 90 502 By what percentage will the price level increase? percent Will this inflation be demand-pull inflation or will it be cost-push inflation? (Click to select) Demand-pull inflation Cost-push inflation If potential real GDP (that...

Question