The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table 24.3
Question:
The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as Table 24.3 shows.
Table 24.3
a. Plot the AD/AS diagram. Identify the equilibrium.
b. Would you expect unemployment in this economy to be relatively high or low?
c. Would you expect concern about inflation in this economy to be relatively high or low?
d. Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium.
e. How will the shift in AD affect the original output, price level, and employment?
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ANSWER a b Observing the table when the price level increases from 140 to 160 the AD will fall from ...View the full answer
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