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 110 be the equilibrium price level? Why won't a price level of 130 index be the equilibrium price level?
(c)Suppose aggregate demand increases by $400 billion at each price level.What will be the new equilibrium price and output levels?
(d)What factors might cause aggregate demand to increase?
Definitions:
Censure
Formal disapproval or criticism of someone or something, typically in an official context.
Deontological Theory
A moral philosophy that emphasizes the importance of duty and the inherent rightness or wrongness of actions, regardless of the consequences.
Moral Worth
The value of actions or principles based on their ethical soundness or righteousness.
Functionalist Approach
A perspective in sociology and anthropology that interprets society as a structure with interrelated parts designed to meet the biological and social needs of the individuals in that society.
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