Suppose the Aggregate Demand and Short-Run Aggregate Supply Schedules for a Hypothetical

question 6

Essay

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?

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Definitions:

Heritability of Traits

The proportion of variation in traits among individuals in a population that can be attributed to genetic differences.

Genetic Differences

Variations in the genes among individuals or populations, which contribute to the biological diversity.

Personality Differences

Variations among individuals in regards to enduring patterns of thinking, feeling, and behaving.

Hofstede's Dimensions

A framework for cross-cultural communication, developed by Geert Hofstede, that describes the effects of a society's culture on the values of its members.