You are given the following equation for the aggregate

Assignment Help Microeconomics

Reference no: EM13377758

You are given the following equation for the aggregate demand (AD) and short-run aggregate supply (SAS) curve: AD: Y = 1.25A p + 2.5M /P

SAS: Y = 11,250 - 20W + 1,000P

Where Y is real GDP, A p is the amount of autonomous planned spending that is independent of the interest rate, M? is the nominal money supply, P is the price level, and W is the nominal wage rate. Assume that A&p equals 5,000, M equals 2,000, W equals 50, and natural real GDP, Y?, equals 11,250.

A. Use the values for the autonomous planned spending that is independent of the interest rate and nominal money supply to derive the equation for the aggregate demand curve. Compute the amount of aggregate demand when the price level equals 2.0, 1.25, 1.0, 0.8, and 0.5. graph the aggregate demand curve

B. Derive the equation for the sort-run aggregate supply curve, given that the nominal wage rate equals 50. Compute the amount of short-run aggregate supply when the price level equals 2.0, 1.25, 1.0, 0.8, and 0.5. graph the short-run aggregate supply curve.

C. Given your answers to parts a and b, explain what the shot-run and long-run equilibrium levels of real GDP and the price level are.

D. Given your answers to part c, explain what the equilibrium real wage rate is.

E. Suppose the autonomous planned spending increases by 800 billion so that Ap = 5,800. Explain if this increase is the result of increases willingness of financial market firms to lend to consumers and business firms or a collapse in the housing market, which reduces household wealth and housing construction. Derive the new equation for the aggregate demand curve. Compute the new amount of aggregate demand when the price level equals 2.0, 1.25, 1.0, 0.8, and 0.5. graph the new aggregate demand curve.

Reference no: EM13377758

Questions Cloud

The concept of social security as originally envisioned by : the concept of social security as originally envisioned by president roosevelt the viability of social security within

In this question you will examine the effect of a sales tax : in this question you will examine the effect of a sales tax on a monopolists profit maximizing price and rate of

Consider a monopolist that faces the constant elasticity : consider a monopolist that faces the constant elasticity demand curve yp pa where a lt 0 and the total cost function c

If the economy is operating on the upward sloping portion : if the economy is operating on the upward sloping portion of the short-run aggregate supply sas curve show that an

You are given the following equation for the aggregate : you are given the following equation for the aggregate demand ad and short-run aggregate supply sas curve ad y 1.25a p

How slow the publishing industry has been in adopting new : how slow the publishing industry has been in adopting new changes to technology. i wonder what the aggregate business

Select any 3 parts of the united states constitution or the : select any 3 parts of the united states constitution or the amendments to the constitution and write a discussion post

Akt phopshorylation collapse akt phosphorylation can : akt phopshorylation collapse akt phosphorylation can indicate prognosis for cancer diagnosis in most cases

Business ethics on a global scale in the 1990s pfizer inc : business ethics on a global scale. in the 1990s pfizer inc. developed a new antibiotic called trovan trovafloxacin

User Account

All Pages