Assume That the Potential GDP in the Economy of Peruggia

question 148

Short Answer

Assume that the Potential GDP in the economy of Peruggia is $750 and that the aggregate demand and aggregate supply are as shown below:
a)What is the value of equilibrium GDP and the price level? What type of macroeconomic equilibrium exists?
b)Suppose that a serious firestorm hits parts of the country reducing its aggregate supply by $130.What will be the new values of equilibrium GDP and the price level?
c)What type of gap now exists and what is its size.

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