Question one

Price level (GDP deflator, LRAS SRAS 2005 = 100) SRAS 124 122 120 AD2 AD, $120 12 2 Real GDP (trillions of 2005 dollars) Use the aggregate demand and aggregate supply model to analyze the following business cycle phases. You will focus on the short-run effects and long-run effects. No need to do changes on the graph. Answering the below questions will help you: 1. Explain the economic condition when real GDP is $12.0 trillion. 2. Explain the business cycle phase when real GDP is $12.2 trillion. 3. Explain the business cycle phase when real GDP is less than $11.2 trillion