(LO 1, 2, 3, 4, 5, 6) Table 5.6 shows AD and AS for the economy of Everton. Potential GDP (LAS) is currently 200.

a) On Figure 5.28 draw in and label curves AS1, AD1, and LAS.

b) What are the equilibrium values for the price level and real GDP?

Price: Real GDP:

c) Suppose that aggregate demand in Everton decreased by 60. Complete Table 5.6 showing the new demand, demand 2.

d) Draw a new AD2 curve on Figure 5.28 to show this change.

e) What are the new equilibrium values for the price level and real GDP?

Price: Real GDP:

f) Is there now a recessionary gap or an inflationary gap?

What is the amount of this gap?

There is a(n) gap of g) Put an X next to each of the following factors that could have caused the decrease in demand that you illustrated in (c).
Increased exports Higher taxes Higher interest rates Lower government spending h) Assuming the original AD1, suppose that aggregate supply changed as a result of a dramatic decrease in the price of oil as shown by AS2 in Table 5.6. Draw in the new AS2 in Figure 5.28.
i) What are the equilibrium values for the price level and real GDP now?
Price: Real GDP:
j) Is there now a recessionary or inflationary gap? What is the amount of this gap?
There is a(n) gap of .