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4. Assume the simplified equation of the SRAS is P=3+1.5*Y, while the equation of the AD curve is P=5-0.5Y. Let us assume, that initially, the crossing of the two curves is the long run equilibrium. a) If the AD curve shifts downwards by half a unit, what will be the equilibrium price level in the third period? (taking initial LR eq. as the first period). (10) b) What is the level of output in the fourth period? (10) c) What is the new long run level of output and prices? (5)

          4. Assume the simplified equation of the SRAS is P=3+1.5*Y, while the equation of the
AD curve is P=5-0.5Y. Let us assume, that initially, the crossing of the two curves is
the long run equilibrium.
a) If the AD curve shifts downwards by half a unit, what will be the
equilibrium price level in the third period? (taking initial LR eq. as the
first period). (10)
b) What is the level of output in the fourth period? (10)
c) What is the new long run level of output and prices? (5)

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4. Assume the simplified equation of the SRAS is P=3+1.5*Y, while the equation of the
AD curve is P=5-0.5Y. Let us assume, that initially, the crossing of the two curves is
the long run equilibrium.
a) If the AD curve shifts downwards by half a unit, what will be the
equilibrium price level in the third period? (taking initial LR eq. as the
first period). (10)
b) What is the level of output in the fourth period? (10)
c) What is the new long run level of output and prices? (5)

Added by Kristina H.

Principles of Economics

Gregory Mankiw 8th Edition

Instant Answer

Solved by Expert Crystal Wang

10/13/2023

Step 1

5*Y = 5-0.5Y. Solving for Y, we get: 3+1.5Y = 5-0.5Y 2Y = 2 Y = 1 Therefore, the initial long-run equilibrium output level is Y=1. Show more…

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Assume the simplified equation of the SRAS is P=3+1.5^(**)Y, while the equation of the AD curve is P=5-0.5Y. Let us assume, that initially, the crossing of the two curves is the long run equilibrium. a) If the AD curve shifts downwards by half a unit, what will be the equilibrium price level in the third period? (taking initial LR eq. as the first period). (10) b) What is the level of output in the fourth period? (10) c) What is the new long run level of output and prices? (5) DO NOT USE ANY AI 4. Assume the simplified equation of the SRAS is P=3+1.5*Y,while the equation of the AD curve is P=5-0.5Y . Let us assume, that initially, the crossing of the two curves is the long run equilibrium. a) If the AD curve shifts downwards by half a unit, what will be the equilibrium price level in the third period?(taking initial LR eq.as the first period).(10) b) What is the level of output in the fourth period? (10) C) What is the new long run level of output and prices? (5)

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