Determine equilibrium price level and real output

Reference no: EM1373718

Assume that the aggregate demand and supply schedules for a hypothetical economy are as demonstrate:

Real GDP demanded Price level Real GDP supplied
100 300 450
200 250 400
300 200 300
400 150 200
500 100 100

[A] Use the above information to graph aggregate demand aggregate supply curves. Determine the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Is the equilibrium real output also necessarily the full- employment real output?

[B] If the price level in this economy is 150, will quantity demand equal, exceed, or fall short of quantity supplied? By what amount? If the price level is 250, will quantity demand equal, exceed, or fall short of quantity supplied? By what amount?

[C] Assume that buyers desire to purchase $200 billion of extra real output at each price level. Sketch in the new aggregate demand curve as AD1. What is the new equilibrium price level and level of real output?

Reference no: EM1373718

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