D calculate the aggregate demand curve for this

This preview shows page 1 - 3 out of 3 pages.

(d) Calculate the Aggregate Demand curve for this economy.
Image of page 1

Subscribe to view the full document.

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.
Image of page 2
Image of page 3

{[ snackBarMessage ]}

Get FREE access by uploading your study materials

Upload your study materials now and get free access to over 25 million documents.

Upload now for FREE access Or pay now for instant access
Christopher Reinemann
"Before using Course Hero my grade was at 78%. By the end of the semester my grade was at 90%. I could not have done it without all the class material I found."
— Christopher R., University of Rhode Island '15, Course Hero Intern

Ask a question for free

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern