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Unformatted text preview: JANZBZOO'? 15:16 P.01/02 Carleton University
Department of Economics ﬁJtorial Assignment 3
Groups 1, 3, 5, 7. 9, 11 WWW—mum» ' . ' “200% 1. The economy of Mainland has the following aggregate demand and supply
schedules: Real GDP demanded Real GDP supplied
in the short run (billions of 1986 dollars) Price Level 90 450 . 350
100 400 400
110 350 450
120 300 500
130 250 550
140 200 600 (3) Plot the aggregate demand curve and shortrun aggregate supply curve in a
figure. (b) What is real GDP and the price level in Mainland in a shortrun equilibrium? (c) I Mainland's potential GDP is $500 billion. Plot the longrun aggregate supply
curve in the figure in which you answered part (a). (d) Is Mainland at, above, or below full employment? (e) Assume aggregate demand is increased by $100 billion. What is the new short
run equilibrium? (f) Assume aggregate supply decreases by $100 billion. What is the new shortrun
equilibrium? JANZBZOOT 15:16 P.02/02 Instructor: D. Smith PS#3  odd Winter 200% ' 3. Consider an economy where economists have estimated that last year’s real GDP
was $600'billion, equal to potential GDP. The price level was 120. Suppose that
this year the economists estimate that potential GDP has risen by 10 percent.
However, actual real GDP has fallen by 5 percent, while the price level has also
fallen by 5 percent. Draw an ADAS graph that shows last year’s equilibrium, as well as last year's
aggregate demand, aggregate supply (shortrun and longrun), price level. and real
GDP level. Next, given the information above, show what has happened to the price
and the level of real GDP this year (show this year's equilibrium), plus what has
happened to aggregate demand, shortrun aggregate supply, and longrun
aggregate supply since last year. 4. You are the Prime Minister's economic advisor and you are trying to figure out where
the Canadian economy is headed next year. You have the following forecasts for the AD, SAS, and LAS curves: Real GDP Shortrun Potential GDP
demanded Real GDP supplied
Price Level (billions of 1986 dollars)
115 650 350 520
120 600 450 520
125 550 550 520
130 500 650 520 This year, real GDP is $500 billion and the price level is 120. The Prime Minister wants answers to the following questions: (a) What is your forecast of next year's real GDP? (b) What is your forecast of next year’s price level? (c) What is your forecast of the inflation rate? (d) Will unemployment be above or below its natural rate? (6) Will there be a recessionary gap or an inflationary gap? By how much? TMJYDVLOLi mer ﬂart?) Primiiﬂa LENA .0] ll 7 TOTAL P.02 ...
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 Fall '11
 MICHAELFRANCIS
 Microeconomics

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