6. Nonprice-level determinants of aggregate supply The following graph shows a decrease in aggregate supply (AS) in a hypothetical economy. Specifically, aggregate supply shifts to the left from AS, to AS2, causing the quantity of output supplied at a price level of 125 to fall from $250 billion to $150 billion. ? 200 ASZ AS, 175 150 125 PRICE LEVEL (CPI) 100 75 50 25 1 1 1 0 0 50 350 400 100 150 200 250 300 REAL GDP (Billions of dollars) The following table lists several determinants of aggregate supply. Complete the table by indicating the changes in the determinants necessary to decrease aggregate supply. Change Needed to Decrease AS Determinant Burdensome Regulations Productivity Nominal Wage Rate 5. Macroeconomic equilibrium and the ranges of the aggregate supply curve The following graph shows the aggregate demand (AD) and aggregate supply (AS) curves for a hypothetical economy with full-employment output of $11 trillion. ? 130 AS A AD, 125 AD2 120 115 Macro Eq2 PRICE LEVEL (CPI) 110 105 100 95 90 8.0 8.5 11.5 12.0 9.0 9.5 10.0 10.5 11.0 REAL GDP (Trillions of dollars) Suppose the level of real GDP supplied by firms is $10.5 trillion and the price level is 105. In this case, the quantity of real GDP supplied is the real GDP demanded at a price level of 105, and firms will experience an unplanned in inventories. Firms will respond to the change in inventories by producing output until the economy reaches macroeconomic equilibrium at a price level of and real GDP of Suppose consumers and businesses become less optimistic about future economic conditions, causing the aggregate demand curve to decrease by $1.5 trillion at each price level. Use the green line (triangle symbols) to show the new aggregate demand curve (AD2 ). Be sure that AD2 is parallel to AD (you can click on AD, to see its slope). Then use the purple drop lines (diamond symbol) to indicate the new macroeconomic equilibrium after the shift of aggregate demand. range of the aggregate supply curve, causing the equilibrium The decrease in aggregate demand leads to a movement along the price level to and the equilibrium level of real GDP to