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# D calculate the aggregate demand curve for this

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(d) Calculate the Aggregate Demand curve for this economy.

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2. In the above economy, the Aggregate Supply [AS] Schedule is as follows: Price Level Aggregate Supply (\$billion) 90 160 100 175 110 190 (a) What is the equilibrium price level and the equilibrium level of national income (real GDP) in this economy? (b) When the price level is 100, the desired production of firms is equal to 175 billion. Explain why this is not the equilibrium price level and level of national income (real GDP). 3. The Canadian economy is in long-run equilibrium, at full employment. Due to slow growth in the U.S. economy, there is a sharp decrease in the demand for Canadian exports. (a) Using the Aggregate Demand-Aggregate Supply diagram, show the new equilibrium. What happens to the price level? What happens to real GDP? (b) Assume that the autonomous decrease in exports is \$10 billion. Assume, also, that the Aggregate Expenditure multiplier is two. Will the decrease in real GDP be equal to \$20 billion? Why or why not? (c) Using the same diagram, show the new long-run equilibrium. What happens to the price level? What happens to real GDP? Explain why the long-run equilibrium differs from the short-run equilibrium. 4. The Aggregate Demand (AD) and Aggregate Supply (AS) schedules intersect at a level of real GDP that is equal to \$800 billion. Potential real GDP in this economy is \$850 billion.

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