Refer to the data in the table below. Suppose that the present equilibrium price
ID: 1227129 • 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 $215, and that data set A represents the relevant aggregate supply schedule for the economy. Instructions: Enter your answers as whole numbers. What must be the current amount of real output demanded at the 100 price level? If the amount of output demanded increased by $75 at the 100 price levels shown in A, what would be the new equilibrium real GDP? In business cycle terminology, what would economists call this change in real GDP?Explanation / Answer
a.
Equilibrium aggregate supply = aggregate demand. Hence, the real output demanded is also equal $225
b. If output demanded increase by $75, the new level of demand is $200. Because the price level does not change the quantity supplied would also increase by $75 or fell by $25.
The new equilibrium level of real GDP is $200. This decline in output is a recession.