Aggregate Supply and Aggregate Demand Model

Plot an AD-AS Graph. This problem is adapted from Ch.11Problem 61 Table 11.4 Santher's Economy.

1.Table 11.4describes Santher's economy.

Price Level AD AS

50 1,000 250

60 950 580

70 900 750

80 850 850

90 800 900

Table11.4Price Level: AD/AS

1. (4 points) Plot the AD/AS curves and identify the equilibrium. Label correctly the AD/AS graph, and state the amount of equilibrium price and equilibrium GDP.
2. (2 points) Based on Keynesian and Neoclassical perspectives, would you expect unemployment in this economy to be relatively high or low, and why?
3. (2 points) Would you expect prices to be a relatively large or small concern for this economy, explain why?
4. (2 points) Imagine that input prices fall and so AS shifts to the right by 150 units. Plot a new AS curve and identify the new equilibrium on the same graph from (a). What are the new equilibrium price and GDP figures?
5. (2 points) How will the shift in AS affect the original output, price level, and employment?