TA3_Groups_ODD

TA3_Groups_ODD - JAN-ZB-ZOO'? 15:16 P.01/02 Carleton...

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Unformatted text preview: JAN-ZB-ZOO'? 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 short-run aggregate supply curve in a figure. (b) What is real GDP and the price level in Mainland in a short-run equilibrium? (c) I Mainland's potential GDP is $500 billion. Plot the long-run 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 short-run equilibrium? JAN-ZB-ZOOT 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 AD-AS graph that shows last year’s equilibrium, as well as last year's aggregate demand, aggregate supply (short-run and long-run), 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, short-run aggregate supply, and long-run 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 Short-run 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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This note was uploaded on 10/11/2011 for the course ECON ECON 1000 taught by Professor Michaelfrancis during the Fall '11 term at Carleton.

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TA3_Groups_ODD - JAN-ZB-ZOO'? 15:16 P.01/02 Carleton...

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