Question

*Price
Level
Quantity of Real GDP Demanded
Quantity
of Real GDP supplied*

($ trillion) ($ Trillion)

100 7.8 4.8

120 7.6 5.2

140 7.4 5.6

160 7.2 6.0

180 7.0 6.2

200 6.8 6.4

220 6.6 6.6

240 6.4 6.8

260 6.2 7.0

280 6.0 7.2

300 5.8 7.4

Use the data in the table above to answer the following question. Assume the potential output level is $7.2 trillion.

The Federal Reserve uses monetary policy to close the output gap that exists. What is the new price level that emerges after the Federal Reserve's policy is fully implemented and the gap is closed?

Answer #2

From the given table we can see the initial equilibrium is at a price level of 220.

The potential GDP is $ 7.2 trillion the quantity of real GDP supplied at a price level of 280 is $ 7.2 trillion.

After closing the gap the new price level =
**280**.

Please contact if having any query will be obliged to you for your generous support. Your help mean alot to me please help. Thank you.

answered by: anonymous

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Quantity of Real GDP supplied (trillion of 2019 dollars)
115
6.8
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110
9.4
11.0
105
10.0
10.0
100
10.6
9.0
95
11.2
8.0
90
11.8
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