Graph of aggregate demand and aggregate supply

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Reference no: EM131310232

Assume the United States economy is currently operating at full employment

A. Draw a correctly labeled graph of aggregate demand and aggregate supply and show each of the following.

I Long run Aggregate supply curve.

ii Current output and price level labelled Y1 and Y2 respectively.

B. Now assume the US governement institutes a new tariff on imported goods. On the graph drawn in part a show the effect of this new fiscal policy. label the new equilibrium output and price levels y2 and PL2 respectively.

C. Explain the short run effects of this policy on GDP equilibrium.

Reference no: EM131310232

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