1. Suppose that the aggregate demand and supply schedules for a hypothetical economy are as shown below:
Use these sets of data to graph the aggregate demand and aggregate supply curves.
A. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output?
B. Explain. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250?
C. Suppose that buyers desire to purchase $200 billion of extra real output at each price level. Sketch in the new aggregate demand curve as AD1. What factors might cause this change in aggregate demand? What are the new equilibrium price level and level of real output?
1. Suppose that the aggregate demand and supply schedules for a hypothetical economy are as shown below:
Use these sets of data to graph the aggregate demand and aggregate supply curves.
A. What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full-employment real output?
B. Explain. Why will a price level of 150 not be an equilibrium price level in this economy? Why not 250?
C. Suppose that buyers desire to purchase $200 billion of extra real output at each price level. Sketch in the new aggregate demand curve as AD1. What factors might cause this change in aggregate demand? What are the new equilibrium price level and level of real output?
Related textbook solutions
Related questions
Suppose the aggregate demand and short-run aggregate supply schedules for a hypothetical economy are as shown below:
| Amount of real domestic output demanded (billions) | Price level (price index) | Amount of real domestic output supplied (billions) |
|---|---|---|
| 60 | 115 | 300 |
| 120 | 110 | 240 |
| 180 | 105 | 180 |
| 240 | 100 | 120 |
| 300 | 95 | 60 |
What will be the equilibrium price and real output level in this hypothetical economy? Is this level of real GDP also the full-employment level of output? Explain.
Why won't a price level of 100 be the equilibrium price level? Why won't a price level of 110 index be the equilibrium price level?
Suppose aggregate demand increases by $120 billion at each price level. What will be the new equilibrium price and output levels?
Suppose short-run aggregate supply increases by $120 billion at each price level. What will be the new equilibrium price and output levels?
1) Assume the following data for a country: total population, 500; population under 16 years of age or institutionalized, 120; not in labor force, 150; unemployed, 23; part-time workers looking for full-time jobs, 10. What is the size of the labor force? What is the unemployment rate?
2) If the CPI was 110 last year and is 121 this year, what is this yearâs rate of inflation? In contrast, suppose that the CPI was 110 last year and 108 this year. What is this yearâs rate of inflation? What term do economics use to describe this second outcome?
3) Use the hypothetical economy data in the table below to answer the following questions.
| Amount of Real GDP Demand, in Billions | Price Level (Price Index) | Amount of Real GDP Supplied, in Billions |
| $180 | 300 | $500 |
| 260 | 250 | 400 |
| 300 | 200 | 300 |
| 420 | 150 | 200 |
| 560 | 100 | 100 |
â¨
a) What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Use Excel to graph both the aggregate demand and aggregate supply curves. Can there be equilibrium level of output at below full employment?
b) At what price level will aggregate supply FALL BELOW [equal] aggregate demand? At what price level will demand fall below aggregate supply? If given a price level of 250, will aggregate demand exceed supply?
c) If the aggregate demand schedule shifted by $140 billion to the right at every level, what would be the new equilibrium level of income?
