Price Level 20,35,50,85,110,135
Real GDP demanded(in billions) 100, 75,55,25,15,10
Real GDP supplied ( in billions) 20,40,55,85,105,120
1) i. Using the information provided, plot and draw the Aggregate Demand and Aggregate Supply curves by hand. Insert your drawing below.
ii. Identify and show the macroeconomic equilibrium on your drawing from part i.
iii. Assume potential GDP is at $63 Billion. Illustrate the potential GDP on your drawing from part i. Is there an inflationary or recessionary gap? Explain why.
2) Assume that Australia's macroeconomic equilibrium is initially at full employment. There is a slower economic growth in a number of Australia's trading partners including China and Indonesia. As a result, the demand for Australian beef from these countries decreases. Using AD- AS model, explain carefully the immediate and long-term effects of this event towards the Australian economy. Draw by hand the appropriate Aggregate Demand-Aggregate Supply diagram to support your explanation.
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