1) What is GDP? Explain each variable of the GDP equation. 2) What is the difference between "real GDP" and 'nominal GDP"? 3) What is Aggregate Demand and Aggregate Supply? What is the equilibrium point known as in macroeconomics? Q 4-5 picture) 120 Price level Recessionary Astionary PPC 20 FE 120 140 150 Real GDP of millions) Figure 10.5 Full-employment equilibrium occurs when the aggregate demand (AD,) intersects aggregate supply (AS) at full-employment output (FE). If aggregate demand (AD;) intersects below full-employment output, a recessionary gap exists with low employment levels, low output levels, and low inflation If aggregate demand ADJ intersects above full-employment output, an inflationary gap exists with high employment levels, higher output levels, and higher inflation. 4) Explain what happens when there is a shift to the left, i.e., below the equilibrium point? 5) Explain what happens when there is a shift to the right, i.e., above the equilibrium point? 6) Explain the logic of the 'prosperity cycle'. Who do you find more convincing: Adam Smith or Keynes? (In other words, demand comes first or supply?) Justify answer. explaining the logic of 'prosperity cycle', explains the differences Smith and Keynes and justification of preferring once theory over another. 7) explain the equation GDP = C + G + 1 + (X - M)