-The Table Above Shows Yellowland's Economy Aggregate Demand and Supply

question 155

Essay

-The table above shows Yellowland's economy aggregate demand and supply schedules. Yellowland's potential GDP is $300 billion.
a) Plot the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply curve.
b) What are the short-run equilibrium real GDP and price level in Yellowland?
c) What is the long-run equilibrium real GDP?
d) Is Yellowland's short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is the inflationary gap (if any)?
e) Suppose aggregate supply decreases by $150 billion. Plot the new aggregate supply curve. How do real GDP and the price level change in the short run?
f) Is Yellowland's new short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is the inflationary gap (if any)?

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