Price level Real GDP demanded (billions of 2000 Real GDP supplied (billions of 2000 dollars) dollars) 90 450 150 100 400 250 110 350 350 120 300 450 130 250 550 140 200 600 The table above shows Econland's economy aggregate demand and aggregate supply schedules. Econland's potential GDP is $300 billion. a. Graph the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve (LRAS). Make sure to have price level on vertical axis and real GDP on horizontal axis. b. What are the short-run equilibrium price level and real GDP in Econland? c. What is the long-run equilibrium real GDP?(hint: it is the same as the potential GDP) d. Does Econland have an inflationary gap or a recessionary gap? e. What is the size of the gap? (1 pt) f. What specific fiscal policy would you prescribe to close the gap? g. What specific monetary policy would you prescribe to close the gap?
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Looking at the table, we can see that at a price level of 110, the real GDP demanded is 350 and the real GDP supplied is also 350. Show more…
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The spreadsheet lists real GDP $(Y)$ and the components of aggregate planned expenditure in billions of dollars. $$\begin{array}{|c|c|c|c|c|c|c|c|} \hline & \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} & \mathrm{F} & \mathrm{G} \\ \hline 1 & & \mathrm{Y} & \mathrm{C} & 1 & \mathrm{G} & \mathrm{X} & \mathrm{M} \\ \hline 2 & \mathrm{A} & 100 & 110 & 50 & 60 & 60 & 15 \\ \hline 3 & \mathrm{B} & 200 & 170 & 50 & 60 & 60 & 30 \\ \hline \mathbf{4} & \mathrm{C} & 300 & 230 & 50 & 60 & 60 & 45 \\ \hline 5 & \mathrm{D} & 400 & 290 & 50 & 60 & 60 & 60 \\ \hline 6 & E & 500 & 350 & 50 & 60 & 60 & 75 \\ \hline 7 & F & 600 & 410 & 50 & 60 & 60 & 90 \\ \hline \end{array}$$ a. What is aggregate planned expenditure when real GDP is $\$ 200$ billion? b. If real GDP is $\$ 200$ billion, explain the process that moves the economy toward equilibrium expenditure. c. If real GDP is $\$ 500$ billion, explain the process that moves the economy toward equilibrium expenditure.
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Refer to the data in the table below. Suppose that the present equilibrium price level and level of real GDP are 100 and $280 and that data set A represents the relevant aggregate supply schedule for the economy. (A) Price Level | Real GDP 100 | 205 100 | 230 100 | 255 100 | 280 (B) Price Level | Real GDP 110 | 230 100 | 230 95 | 230 90 | 230 (C) Price Level | Real GDP 110 | 280 100 | 255 95 | 230 90 | 205 Instructions: Enter your answers as whole numbers. a. What must be the current amount of real output demanded at the 100 price level? $ 225 b. If the amount of output demanded declines by $25 at the 100 price levels shown in A, what would be the new equilibrium real GDP? $ 200 In business cycle terminology, what would economists call this change in real GDP? Recession
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