What if the price level unexpectedly falls

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Reference no: EM13192154

AS (P100) AS (P125) AS (P75)
P Q P Q P Q
125 280 125 250 125 310
100 250 100 220 100 280
75 220 75 190 75 250

Full-employment level of real output is $250 and the initially the price level is 100. Use the short-run aggregate supply schedules above to answer the questions that follow:
a)What will be the level of real output in the short run if the price level unexpectedly rises from 100 to 1258 because of an increase in aggregate demand? What if the price level unexpectedly falls from 100 to 75 because of a decrease in aggregates demand?
b)What will be the level of real output in the long run when the price level rises from 100 to 125? When it falls from 100 to 75?

Reference no: EM13192154

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