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- Suppose that the aggregate
demand andaggregate supply schedules for a hypothetical economy are as shown in the following table
Amount of
Real
Demanded, Supplied,
Billions Billions
$100 300 $450
200 250 400
300 200 300
400 150 200
500 100 100
a. Use the data above to graph the agregate demand and
b. If the price level in this economy is 150, will quanity demanded equal, exceed, or fall short of quantity supplied? By what amount? If the price level is 250, will quantity demanded equal, exceed, or fall short of quantity supplied? By what amount?
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 are the new
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- Instructions: Enter your answers as whole numbers. A) What are 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)If the price level in this economy is 150, will quantity demanded equal, exceed, or fall short of quantity supplied? By what amount? If the price level is 250, will quantity demanded equal, exceed, or fall short of quantity supplied? By what amount? C) Suppose that buyers desire to purchase $ 200 billion of extra real output at each price level. What are the new equilibrium price level and level of real output?arrow_forwardMake 1 demand graph and 1 supply graph to plot the data in the table Suppose that the aggregate demand and aggregate supply schedules for a hypothetical economy are as shown below: Amount of Real GDP Demanded, Billions Price Level (Price Index) Amount of Real GDP Supplied, Billions $100 300 $450 200 250 400 300 200 300 400 150 200 500 100 100arrow_forwardSuppose the table below shows the schedules for aggregate demand and short-run aggregate supply in the economy of Tipitina. Further assume that potential output in Tipitina is $200 billion. Use this information to solve the next four questions. Aggregate Quantity of Goods and Services… Price Level Demanded (in billions of $) Supplied (in billions of $) 50 $350 $250 75 300 300 100 250 330 125 200 350 150 150 360 What type of output gap is Tipitina currently facing? Indicate your answer below by writing either “inflationary”, “recessionary”, or “no gap” EXACTLY. How large is the gap? Enter your answer as a whole number. Do not put any symbols or words in your answer. Type of gap = Size of gap = $ billionarrow_forward
- The following graph shows the aggregate demand (AD) curve in a hypothetical economy. At point A, the price level is 140, and the quantity of output demanded is $300 billion. Moving down along the aggregate demand curve from point A to point B, the price level falls to 120, and the quantity of output demanded rises to $500 billion. 170 100 180 140 130 120 110 AD 100 00 100 200 300 400 B00 700 OUTPUT (Billians of dollars) As the price level falls, the cost of borrowing money will , causing the quantity of output demanded to Additionally, as the price level falls, the impact on the domestic interest rate will cause the real value of the dollar to in foreign exchange markets. The number of domestic products purchased by foreigners (exports) will therefore and the number of foreign products purchased by domestic consumers and firms (imports) will Net exports will therefore causing the quantity of domestic output demanded toarrow_forwardUrgently needarrow_forwardEconomicsarrow_forward
- 2. The theory of liquidity preference and the downward-slopingaggregate demand curve Suppose the money market for some hypothetical economy is given by the following graph, which plots the money demand and money supply curves. Assume the central bank in this economy (the Fed) fixes the quantity of money supplied. Suppose the price level increases from 90 to 105. Shift the appropriate curve on the graph to show the impact of an increase in the overall price level on the market for money. INTEREST RATE (Percent) 18 15 12 8 3 0 0 20 Money Supply Money Demand 40 60 80 MONEY (Billions of dollars) 100 120 Money Demand Money Supply Following the price level increase, the quantity of money demanded at the initial interest rate of 9% will be supplied by the Fed at this interest rate. As a result, individuals will attempt to bonds and other interest-bearing assets, and bond issuers will realize that they restored in the money market at an interest rate of % than the quantity of money their money…arrow_forwardThe following graph shows the aggregate demand curve in a hypothetical economy. Assume that the economy's money supply remains fixed. PRICE LEVEL (CPI) 180 T 150 140 130 120 110 100 90 80 0 Aggregate Demand 100 200 300 400 500 600 REAL GDP (Billions of dollars) 700 800 (?) Which of the following are reasons the aggregate demand curve is downward sloping? Check all that apply. A higher price level makes domestically produced goods more expensive than foreign goods. A lower price level leads to a lower interest rate. A higher price level decreases consumption through the substitution effect. As the aggregate price level rises, the purchasing power of households' saving balances will demanded to This phenomenon is known as the effect. causing the quantity of outputarrow_forward5arrow_forward
- Refer to image; please show workarrow_forwardQUESTION 1 Aggregate Demand (AD) Is drawn with price level, average price for everything in the economy relative to the base year price, (not the dollar price) on the vertical axis and Real GDP demanded on the horizontal axis. Use the numbers from the following table and calculate the Real GDP Demanded using expenditure approach of GDP, and plot all the points on the Aggregate Demand. Connect all the points to draw the aggregate demand. [Review Chapter 5 powerpoints, textbook and Internet source to find what numbers have tolbe added to get each of the points In the Aggregate Demand curve.] (国 Real GDP Demanded (AD): C+l+G+ (X-M) Real GDP Supplied: Ageregate Supply (AS) $680 Price Level 110 $400 $185 $150 $55 $50 115 390 180 150 50 50 720 120 380 175 150 45 50 750 125 370 170 150 40 50 780 130 360 165 150 35 50 810 8.arrow_forwardRefer to the data in the table given below. Suppose that the present equilibrium price level and level of real GDP are 100 and $280, and that data set A represents the relevant aggregate supply schedule for the economy. (A) Price Level 100 100 100 100 Real GDP 205 230 255 280 (B) Price Level 110 100 95 90 Real GDP 230 230 230 230 (C) Price Level 110 100 95 90 Real GDP 280 255 230 205 a. What must be the current amount of real output demanded at the 100 price level? Real output demanded = $ b. If the amount of output demanded declines by $25 at the 100 price level shown in A, what will be the new equilibrium real GDP? The new equilibrium level of real GDP = $ In business cycle terminology, what would economists call this change in real GDP? (Click to select)arrow_forward
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