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CHAPTER 9 MACRO (20 ECON) Aggregate Price Level Output (short-run aggregate supply) Output (aggregate demand) 150...

CHAPTER 9 MACRO (20 ECON)

Aggregate Price Level Output (short-run aggregate supply) Output (aggregate demand)
150 1000 200 + 200 = 400
125 800 400 + 200 = 600
100 600 600 + 200 = 800
75 400 800 + 200 = 1000
50 200 1000 + 200 = 1200

D. Short-run aggregate supply needs to decrease by __ at every price in order for the economy to return to long-run equilibrium at an output of 600. The aggregate price level at full employment would be $__.

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Answer #1

D).  Short run aggregate supply needs to decrease by 200 units at every price in order for the economy to return to long-run equilibrium at an output of 600.

Because new output( aggregate demand) changes by 200 units so we have to decrease aggregate supply by 200 units to maintain long-run equilibrium at an output of 600.

Ie. 1000- 200 units = 800 units

800-600 units = 600 units ...... this is point where long runequilibrium at an output of 600.

The aggregate price level at full employment would be $ 100.

Change is price will be reduced by $25 as same as output to maintain level of full employment.

Ie. Aggregate Price level

125

100 (So this is the aggregate price level at where the employment would be)

75

50

25

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