Suppose the SRAS curve for an economy has the following points:

GDP Deflator	90	100	110	120	130	140	150
Aggregate RGDP supplied	$7T	$8T	$9T	$10T	$11T	$12T	$13T

Also assume the AD curve has the following points:

GDP Deflator	90	100	110	120	130	140	150
Aggregate RGDP demanded	$15T	$14T	$13T	$12T	$11T	$10T	$9T

Dislcaimer: It'd be great if you could help me with the spots that are not filled in. If you could also graph number 2 that would be great.

1. What is the short-run equilibrium in this economy?

The point at which the AD and SRAS curves intersect represents the short-term equilibrium. Based on the data provided, we can observe that the intersection point happens when the GDP Deflator is at 110 and the aggregate real gross domestic product (RGDP) is $9T.

2. Assuming the LRAS is equal to $9T, is this economy currently in a positive or negative business cycle? Graph this situation.

When the long-run aggregate supply (LRAS) is equivalent to the short-run equilibrium aggregate RGDP of $9T, it indicates that the economy is operating at its full capacity with no positive or negative business cycle. The graph would exhibit the intersection point of the SRAS curve and the AD curve at the same spot where the SRAS curve intersects with the LRAS curve.

3. Given the situation above, suppose the government decides to do nothing. What happens next to the economy? Explain and show the shift on the graph above. How would real GDP and inflation be expected to change in this scenario?

In the absence of any government intervention, the economy is likely to move towards the long-run aggregate supply (LRAS) curve. This movement will lead to a decline in both inflation and aggregate real gross domestic product (RGDP). The reason behind this shift is that the short-run aggregate supply (SRAS) curve will shift towards the left, reflecting a decrease in input prices as firms respond to a decline in demand by reducing their output. In graphical terms, this would be illustrated by a leftward shift of the SRAS curve resulting in a new short-run equilibrium point at a lower level of aggregate RGDP and a lower GDP deflator.

4. If the scenario given in #3 plays out, which of the following will occur?

a) Government budget deficits will increase I CHOSE THIS ONE

b) Government budget deficits will decrease

c) Government budget deficits will remain unchanged

5. Now suppose that instead of doing nothing (as examined in #3 and #4), the government instead decides to decrease government spending by $400B.

This would be an example of:

a) Expansionary Monetary Policy

b) Contractionary Montary Policy

c) Expansionary Fiscal Policy

d) Contractionary Fiscal Policy I CHOSE THIS ONE

6. Which of the following would be the effect on the governments budget deficit?

a) It will increase

b) It will decrease

c) It will remain unchanged

7. Using the simple spending multiplier, if the marginal propensity to consumer is 0.9 what will be the new short-run equilibrium? Show the changes to the AD-AS graph.