Economics_2020_wrksht_2 - Worksheet#2 Macro Economics 2020 AGGREGATE SUPPLY AND AGGREGATE DEMAND 1 In year zero AS and AD curves cross at the full

Worksheet #2 Macro Economics 2020 AGGREGATE SUPPLY AND AGGREGATE DEMAND 1. In year zero, AS and AD curves cross at the full employment level of output. In year one the Peak Economy had 3% AS growth and 6% AD growth. In year two the Downturn economy has 3% AS growth and 0% AD growth. Using the AS and AD curves, graph the change from year 0 to year 1 to year 2. Make sure to indicate the change in full employment output, actual output and inflation. In the downturn economy is there excess capacity? 2. If we are on the portion of the aggregate supply curve in which there is excess capacity then a. can increase output and will have inflation b. can decrease output and will have inflation c. can increase output and will not have inflation d. we are at the full employment output