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AS - David Hanson Economics 2010 Section 67061 Part I 1...

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David Hanson Economics 2010 Section 67061 Part I 1. AD/AS diagram for the U.S. Economy – 2 nd Quarter 2008. (See Figure I) 2. The equilibrium price level on the diagram for June 2008 as measured by the CPI- U. (See Figure I) 3. The equilibrium “actual” Real GDP on your diagram. (See Figure I) 4. With the natural rate of unemployment as 4.3%. Using the unemployment rate from the Bureau of Labor Statistics for June 2008, the actual rate of unemployment is 5.5%. a. GDP Gap=GDP Actual – GDP Potential b. Okun’s Law states the Gap x2 for every percentage point. c. 5.5% – 4.3% = 1.2% x 2 = 2.4% GDP x $11,727.4 Actual GDP = $281.4576 ($281.46) + $11,727.4 Actual GDP = $12,008.86 Potential GDP (Full Employment) 5. "Full Employment (or Long Run AS) curve" and the recessionary gap. (See Figure I) Part II 1. In 2009 OPEC increases the price of imported crude oil. If this is the only change to the U.S. Economy, aggregate supply would increase. An increase in world oil prices is likely to impact aggregate supply because oil is an important commodity used in nearly every industry and also domestically. Given the wide-ranging
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