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Assume that the accompanying graph depicts aggregate supply and demand conditions in an economy. Full employment occurs when $5 trillion

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Assume that the accompanying graph depicts aggregate supply and demand conditions in an economy. Full employment occurs when $5 trillion of real output is produced.

(a) What is the equilibrium rate of output?

(b) How far short of full employment is the equilibrium rate of output?

(c) Illustrate a shift of aggregate demand that would change the equilibrium rate of output to $5 trillion. Label the new curve AD2.

(d) What is the price level at this full-employment equilibrium?

(e) Illustrate a shift of aggregate supply (AS2) that would, when combined with AD1, move equilibrium output to $5 trillion.

(f) What is the price level at this new equilibrium?

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a 4 trillion per year b 1 trillion c See curve AD 2 in the gr…View the full answer


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The Macro Economy Today

The Macro Economy Today

ISBN: 978-1259291821

14th edition

Authors: Bradley R. Schiller, Karen Gebhardt

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Question Details
Chapter # 7
Section: Exercise Questions
Problem: 19
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Question Posted: May 03, 2018 08:58:29
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