In the Table Below Are Aggregate Demand and Aggregate Supply

question 162

Essay

In the table below are aggregate demand and aggregate supply schedules.

(a)Suppose in Year 1,aggregate demand is shown in columns (1)and (2)in the above table and short-run aggregate supply is shown in columns (1)and (4)in the above table.What will be the equilibrium level of real GDP and the equilibrium price level?
(b)Suppose in Year 2,aggregate demand changes and is now shown in columns (1)and (3).What will be the new equilibrium level of real GDP and the new equilibrium price level?
(c)Suppose in Year 3,aggregate demand changes and is now shown again in columns (1)and (2).What will be the new level of real GDP and the new price level if prices and wages are completely flexible downward?
(d)Suppose in Year 3,aggregate demand changes and is now shown again in columns (1)and (2).What will be the new level of real GDP and the new price level if prices and wages are completely inflexible downward?

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Definitions:

Quarterly Compounded

Interest that is calculated and added to the principal every three months, increasing the amount on which subsequent interest calculations are based.

Quarterly Compounded

Refers to the calculation of interest that is added to the principal balance of an investment or loan four times a year.

Equivalent Effective Rate

A comparable interest rate that equates the interest earned on different investments or loans over the same time period, taking into account the effects of compounding.

Face Value

The original value of a financial instrument as stated on the instrument itself, without accounting for interest or market value fluctuations.