Assume that the accompanying graph depicts aggregate supply and demand conditions in an economy. Full employment occurs when$5 trillion of real output is produced. The economy is currently in equilibrium at point A.Price Level (average price)26024022020018016014012010001AAS₁2 3 4 5 6 7AD₁Real Output (in trillions of dollars per year)8ToolsEQInstructions: In parts a, b, and d, enter your responses as a whole number.a. What is the equilibrium rate of output?$trillion per yearb. How far short of full employment is the equilibrium rate of output?$trillionc. On the graph, illustrate a shift of aggregate demand that would change the equilibrium rate of output to $5 trillion.Instructions: Shift the aggregate demand curve (AD1) such that the equilibrium in the macro model is at $5 trillion. Then use the toolprovided 'EQ' to label the new equilibrium.d. What is the price level at this full-employment equilibrium?

Aggregate demand refers to the total demand for commodities and services made by all the economic…

Assume that the accompanying graph depicts aggregate supply and demand conditions in an economy. Full employment occurs when $5 trillion of real output is produced. The economy is currently in equilibrium at point A. rice Level (average price) 260 240 220 200 180 160 140 A AS, Tools EQ

Assume that the accompanying graph depicts aggregate supply and demand conditions in an economy. Full employment occurs when $5 trillion of real output is produced. The economy is currently in equilibrium at point A. rice Level (average price) 260 240 220 200 180 160 140 A AS, Tools EQ

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter8: Macroeconomic Equilibrium: Aggregate Demand And Supply

Section: Chapter Questions

Problem 11E

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Question

Assume that the accompanying graph depicts aggregate supply and demand conditions in an economy. Full employment occurs when
$5 trillion of real output is produced. The economy is currently in equilibrium at point A.
Price Level (average price)
260
240
220
200
180
160
140
120
100
0
1
A
AS₁
2 3 4 5 6 7
AD₁
Real Output (in trillions of dollars per year)
8
Tools
EQ
Instructions: In parts a, b, and d, enter your responses as a whole number.
a. What is the equilibrium rate of output?
$
trillion per year
b. How far short of full employment is the equilibrium rate of output?
$
trillion
c. On the graph, illustrate a shift of aggregate demand that would change the equilibrium rate of output to $5 trillion.
Instructions: Shift the aggregate demand curve (AD1) such that the equilibrium in the macro model is at $5 trillion. Then use the tool
provided 'EQ' to label the new equilibrium.
d. What is the price level at this full-employment equilibrium?

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Step 1: Define AD-AS equilibrium

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Step 2: Find Equilibrium point

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Step 3: Explain the Deviation from full employment

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Step 4: Explain the Shift of AD

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Step 5: Find New price

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