9 Extended Problems Price level Real GDP demanded (billions of 2005 dollars) Real GDP supplied...

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9  Extended Problems

 

Price level	Real GDP demanded (billions of 2005 dollars)	Real GDP supplied (billions of 2005 dollars)
70	825	375
80	750	450
90	675	525
100	600	600
110	525	675
120	450	750
130	375	825
140	300	900

1) The table above shows Purpleland's economy aggregate demand and supply schedules. Purpleland's potential GDP is $675 billion.

a) Plot the aggregate demand curve, the short-run aggregate supply curve, and the long-run aggregate supply curve.

b) What are the short-run equilibrium real GDP and price level in Purpleland?

c) What is the long-run equilibrium real GDP?

d) Is Purpleland's short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is the inflationary gap (if any)?

e) Suppose aggregate demand increases by $150 billion. Plot the new aggregate demand curve. How do real GDP and the price level change in the short run?

f) Is Purpleland's new short-run macroeconomic equilibrium a full-employment equilibrium, below full-employment equilibrium, or above full-employment equilibrium? What is the recessionary gap (if any)? What is the inflationary gap (if any)?

 

Price level	Real GDP demanded (billions of 2005 dollars)	Real GDP supplied (billions of 2005 dollars)
90	450	150
100	400	250
110	350	350
120	300	450
130	250	550