59. Review the problem in the Work It Out titled

"Interpreting the AD/AS Model." Like the information provided in that feature, Table 10.2 shows information on aggregate supply, aggregate demand, and the price level for the imaginary country of Xurbia.

a. Plot the AD/AS diagram from the data. Identify the equilibrium.

b. Imagine that, as a result of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium.

c. How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?

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Price Level AD AS 110 700 600 120 690 640 130 680 680 140 670 720 150 660 740 160 650 760 170 640 770 Table 10.2 Price Level: AD/AS