Suppose the potential level of real GDP for a hypothetical economy is $250 and the price level (P) initially is 100.Use the following short-run aggregate supply schedules below to answer the questions. 
(a) What will be the short-run level of real GDP if the price level rises unexpectedly from 100 to 110 because of an increase in aggregate demand? Falls unexpectedly from 100 to 90 because of a decrease in aggregate demand? Explain each situation.(b) What will be the long-run level of real GDP when the price level rises from 100 to 110? Falls from 100 to 90? Explain each situation.
Definitions:
Growth Rate
The rate at which an economic variable, such as the Gross Domestic Product (GDP), a company's profits, or an investment's value, increases over a specified period of time.
Market Capitalization Rate
The expected return on an investment in the market, often used in the valuation of stocks and to determine a company's cost of equity.
PVGO
Present Value of Growth Opportunities; a model that estimates the value of a firm's shares excluding its current earnings, focusing on future growth.
P/E Ratio
Price-to-earnings ratio, a valuation metric for determining the relative worth of a company's shares by dividing stock price by earnings per share.
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