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Suppose we have the following information for an economy: GDP deflator 90 100 110 120 130 Aggregate Expenditure 550 500 450 400 350 Output

 

Suppose we have the following information for an economy: GDP deflator 90 100 110 120 130 Aggregate Expenditure 550 500 450 400 350 Output 150 300 450 600 750 a. Plot the AD and AS curves in a carefully labeled diagram. b. What are the short-run equilibrium values of real GDP and the price level? Suppose potential output is 500 for the economy in the above question. a. Add a line to your diagram (question 1) to illustrate potential GDP. b. What is the size of any output gap you see in the diagram?

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a Plotting the AD and AS curves AD Aggregate Demand curve The AD curve represents the relationship b... blur-text-image

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