-The Figure Above Shows the Initial Aggregate Demand Curve, AD

question 213

Essay

-The figure above shows the initial aggregate demand curve, AD?, the initial short-run aggregate supply curve, SAS?, and the long-run aggregate supply curve, LAS. The points in the figure show possible combinations of real GDP and the price level at which the economy of Atlantia is in macroeconomic equilibrium. The economy is initially at point A. Then, the government increases its expenditure on goods and services. Draw the new aggregate demand and short-run aggregate supply curves in the figure to show the effects of this event on Atlantia's real GDP and price level.
a)What happens to Atlantia's potential GDP?
b)In the short run, what happens to aggregate supply and aggregate demand?
c)What are the new short-run equilibrium real GDP and price level?
d)In the long run, what happens to the short-run aggregate supply and aggregate demand?
e)What are the new long-run equilibrium real GDP and price level?

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Definitions:

Leader

A person or entity that guides or directs others by setting goals, creating a vision, and influencing behaviors towards achieving defined objectives.

Manager

An individual responsible for planning, organizing, leading, and controlling resources to achieve specific organizational goals.

Strike

The direction of a horizontal line on an inclined surface.

Dip

The angle that a layer or structural surface makes with the horizontal, measured perpendicular to the strike.