Review the problem in the Work It Out titled Interpreting the AD/AS Model. Like the information provided

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Review the problem in the Work It Out titled "Interpreting the AD/AS Model." Like the information provided in that feature, Table 24.2 shows information on aggregate supply, aggregate demand, and the price level for the imaginary country of Xurbia.

Table 24.2

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

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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