Plot both the AD and the AS curves of the US economy

Reference no: EM131716821

Quantitative Literacy Assignment - Aggregate Supply & Aggregate Demand

Consider the table below for the aggregate demand (AD) for and the aggregate supply (AS) of goods and services in the United States.

Price Level - P (Y Axis)	Real GDP Demanded in billions (AD)	Real GDP Supplied in billions (AS)
50	16,300	15,100
60	16,200	15,200
70	16,100	15,300
80	16,000	15,400
90	15,900	15,500
100	15,800	15,600
110	15,700	15,700
120	15,600	15,800
130	15,500	15,900
140	15,400	16,000
150	15,300	16,100
160	15,200	16,200
170	15,100	16,300

1. On the grid below, carefully plot both the AD and the AS curves of the U.S. economy. Use a title for your graph and label the axes and curves. Use the X axis for Real GDP and the Y axis for the price level.

2. a. Calculate the slope of the AD curve using the data in the table/graph.

b. Calculate the slope of the AS curve using the data in the table/graph.

c. Use 3-4 well-written sentences and numerical examples from the table for the each of the following two questions.

(i) Explain the slope of the AD curve based on the "wealth effect."

(ii) Explain the slope of the AS curve based on the "sticky input price effect."

3. Use the AD-AS graph in Question 1 to identify the short-run equilibrium price and output levels. Explain, using 2-3 well written sentences, why this particular price-output combination, as opposed to any other, is the equilibrium outcome. Use numerical values for the price level and output in your explanation.

4. Refer to your graph. Explain, in 2-3 well-written sentences, a specific real world scenario or example that can lead to an increase in output (real GDP) from its current equilibrium level. What is the resulting effect on the price level (P) in your scenario? What is the correct terminology that corresponds to this type of price level change (inflation)?

5. Reproduce your graph in Question 1 on the grid blow. Now suppose that (1) crude oil prices falls slightly and (2) stock and housing prices decline sharply. Correctly translate (draw) the effects of these changes into shifts in AD and AS curves. Explain, using 2-3 well written sentences and numerical values, what happened to AD and AS and how the new equilibrium price and quantity levels compare with the old ones.

Reference no: EM131716821

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Reviews

len1716821

11/11/2017 12:36:54 AM

This assignment is a required QLP assignment (see syllabus). It is based on Chapter 8 (AD-AS model) and corresponding lecture materials. Please carefully read and follow the instructions below to prevent unnecessary loss of points. The assignment will be available beginning 8:00 p.m. on 11/9/2017. It is due on 9/16/2017 in class. You need to hand in a hard copy of your completed assignment right AFTER the end of lecture (avoid disrupting the class by approaching the podium to submit your assignment in the middle of the lecture).

len1716821

11/11/2017 12:36:48 AM

Print the assignment. Write your full name and ID number in the spaces provided. Give legible hand written answers to all the questions. Remember to answer all the parts in a question. Most importantly, remember your economics (see your class notes and/or textbook)! Staple all the pages of the assignment together. Your answers will be graded by a grader. Your grades will be posted on BB when they become available. Please be patient as the grader is tasked with grading assignments from multiple sections.

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