Use the table and grid below to answer the following questions:
a. In the grid, graph the aggregate demand and short-run aggregate supply curves (label them AD0 and SRAS0). What are equilibrium output and the price level?
b. Assume aggregate demand grows by 100% (output doubles at each price level). Graph the new aggregate demand curve and label it AD1. What is the new equilibrium output and price level?
c. If full employment output is 600, what will be the long-run output and price level given the new aggregate demand curve?

Transcribed Image Text:

Price Level 150 125 100 75 50 Output (short-run aggregate supply) 1,000 800 600 400 200 Output (aggregate demand) 200 400 600 800 1,000