Long-run aggregate supply curve, Macroeconomics

Suppose the potential level of real domestic output (Q) for a hypothetical economy is

$160 and the price level (P) initially is 200. Use the following short-run aggregate supply schedules to answer the questions.

AS (P = 200) AS (P = 210) AS (P = 190)

P     Q      P    Q     P    Q

210 190 210 160 210 220

200 160 200 130 200 190

190 130 190 100 190 160

(a) What will be the short-run level of real GDP if the price level rises unexpectedly from 200 to 210 because of an increase in aggregate demand? Falls unexpectedly from 200 to 190 because of a decrease in aggregate demand?

Explain each situation.

(b) What will be the long-run level of real GDP when the price level rises from 200 to 210? Falls from 200 to 190? Explain each situation.

(c) Show the circumstances described in (a) and (b) on the graph below and derive the long-run aggregate supply curve.

Posted Date: 3/13/2013 2:34:34 AM | Location : United States







Related Discussions:- Long-run aggregate supply curve, Assignment Help, Ask Question on Long-run aggregate supply curve, Get Answer, Expert's Help, Long-run aggregate supply curve Discussions

Write discussion on Long-run aggregate supply curve
Your posts are moderated
Related Questions
A textile mill releases pollution into nearby wetlands, and the associated health and ecological damages are not considered in the private market. Suppose you observe the following

How can an economic development be measured? The UN has developed an extensively accepted set of indices to measure development in opposition to a mix of composite (element or

Explain, using the best framework you can think of (based on our class discussion), the effect of a large federal deficit on interest rates.

In the long-run framework, budget surpluses: A. should be run on a permanent basis since they boost saving and investment and stimulate economic growth. B. should be run whenever o

Explain the elasticity concept as it applies to necessities and luxuries. Calculate the price elasticity of demand when P= 160 - Q= 480: and when P=240 - Q=320. Calculate and inter


You are the manager of a firm that receives revenues of $50,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is -3,

Tariffs and Non-tariff Barriers A significant aspect of the trade reforms of the 1990s was the reduction in the then prevailing very high import duties (over 300 percent in so

If real GDP was $13.1 trillion in 2013 and $13.3 in 2014, what is the growth rate? (b) How many years would it take for GDP (gross domestic product) to double (using your answer fr

illustrate and discuss the implications of various market structures (competitive and non-competitive)for price determination.