Refer to the data in the table below. Suppose that the present equilibrium price
ID: 1158518 • Letter: R
Question
Refer to the data in the table below. Suppose that the present equilibrium price level and level of real GDP are 100 and $260, and that data set C represents the relevant aggregate supply schedule for the economy Price Level Real GDP Price Level Real GDP Price Level Real GDP 110 100 95 90 110 100 95 90 235 210 235 260 235 Instructions: Enter your answers as whole numbers a. What must be the current amount of real output demanded at the 100 price level? b. If the amount of output demanded increased by $25 at the 100 price levels shown in C, what would be the new equilibrium real GDP?$ In business cycle terminology, what would economists call this change in real GDP? (Click to selectyExplanation / Answer
The equilibrium level of real GDP is where the Aggregate Demand (AD) and Aggregate Supply (AS) curves intersect each other.
It has been mentioned to consult data schedule C wherein the equilibrium price level is 100 and the equilibrium real GDP is $260.
a) Since at that level AD = AS, the current amount of real output demanded at price level 100 is $260.
b) If the amount of output demanded rises by $25, the new output demanded is at $260+$25 = $285.
Since in equilibrium, AD = AS, the new equilibrium real GDP would be $285.
An increase in the real GDP represents the upswing part of a business cycle. Since among all the values of real GDP given, $285 is the maximum, it is known as the “peak” or “boom” in a business cycle. But more generally, since this is a phase where real GDP rises, it is known as “Expansion” in business cycle terminology.