10) Initially, an economy is in long-run equilibrium with a real GDP of $4 trillion. Suppose that the productive capacity of the economy increases by 50% and at the same time, the money supply increases at the same rate. 1.) Using the line drawing tool (possibly twice), show the effect on the economy. Properly label your new line. 2.) Using the point drawing tool, show the new equilibrium price level and output. Label the point E2.
10) Initially, an economy is in long-run equilibrium with a real GDP of $4 trillion. Suppose that the productive capacity of the economy increases by 50% and at the same time, the money supply increases at the same rate. 1.) Using the line drawing tool (possibly twice), show the effect on the economy. Properly label your new line. 2.) Using the point drawing tool, show the new equilibrium price level and output. Label the point E2.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter19: The Macroeconomic Perspective
Section: Chapter Questions
Problem 25CTQ: Cross country comparisons of GDP per capita typically use purchasing power parity equivalent...
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10) Initially, an economy is in long-run equilibrium with a real GDP of $4 trillion.
Suppose that the productive capacity of the economy increases by 50% and at the same time, the money supply increases at the same rate.
1.) Using the line drawing tool (possibly twice), show the effect on the economy. Properly label your new line.
2.) Using the point drawing tool, show the new
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Transcribed Image Text:Price Level
220
200-
180-
160-
140-
120-
100-
80
60-
40-
0
LRAS₁
AD₁
2
6
8
Real GDP per year ($ trillions)
10
Q
Q
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