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

question 356

Essay

-The table above shows Purpleland's economy aggregate demand and supply schedules. Purpleland's potential GDP is $675 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 Purpleland?
c) What is the long-run equilibrium real GDP?
d) Is Purpleland'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 demand increases by $150 billion. Plot the new aggregate demand curve. How do real GDP and the price level change in the short run?
f) Is Purpleland'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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Definitions:

Complexity

Referring to the state or quality of being intricate or complicated, often involving numerous interdependent parts or elements.

Purity

The state or quality of being pure, free from contaminants, or possessing a single, unmixed element or nature.

Hertz

The unit of frequency in the International System of Units (SI), representing one cycle per second.

Nanometers

A unit of length in the metric system, equal to one billionth of a meter, commonly used to measure wavelengths of light.