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?

---

Definitions:

Identity Crisis

A period of uncertainty and confusion in which a person's sense of identity becomes insecure, typically due to a change in their expected aims or role in society.

Identity Achievement

A stage in adolescent development in which individuals have explored various options and then committed themselves to certain ideals and goals.

Erikson's Concept

Erikson's Concept refers to the psychosocial theory developed by Erik Erikson, which posits that individuals pass through eight developmental stages, each characterized by a specific crisis that contributes to their social and personality development.

Marcia's Concept

Refers to James Marcia's theory of identity status, which classifies individuals' identity development into four statuses: identity diffusion, foreclosure, moratorium, and identity achievement.