The economy of Neverland has the following (A D) and (A S) schedules. Denote (mathrm{Y}_{A D}) as

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The economy of Neverland has the following \(A D\) and \(A S\) schedules. Denote \(\mathrm{Y}_{A D}\) as the level of real GDP along the \(A D\) curve; let \(\mathrm{Y}_{A S}\) be the level of real GDP along the \(A S\) curve. GDP is shown in billions of 200 2 dollars.

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a. Plot the \(A D\) and \(A S\) curves on a scale diagram.

b. What is the price level and level of real GDP in Neverland's macroeconomic equilibrium?

c. Suppose the level of potential output in Neverland is \(\$ 950 \) billion. Is the current equilibrium level of real GDP greater than or less than potential? How does one refer to this particular output gap?

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Macroeconomics

ISBN: 9780133910445

15th Edition

Authors: Christopher T S Ragan

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