Suppose the aggregate demand and short-run aggregate supply schedules for a hypothetical economy are as shown below:
(a) 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.(b) 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?
(c) Suppose aggregate demand increases by $120 billion at each price level.What will be the new equilibrium price and output levels?
(d) What factors might cause aggregate demand to increase?
(e) Suppose short-run aggregate supply increases by $120 billion at each price level.What will be the new equilibrium price and output levels?
Definitions:
Enzymes
Cellular molecules that considerably quicken the tempo of almost every chemical interaction taking place within cells.
Digestion
The breakdown of food into smaller components that can be absorbed and assimilated into the body.
Physiologist
A scientist who studies the functions and mechanisms of living organisms and their parts.
Anatomist
A scientist who specializes in the study of the structure of living things.
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