What happened to longrun aggregate supply

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Go to www.gpoaccess.gov/eop/tables10.html, the Economic Report of the President: 2010 Report Spreadsheet Tables Web site. (For reports after 2010, in the Web address change the 10 to 11 or 12, depending on the year.) In the tables, use Table B.2, "Real gross domestic product, 1960-2009," to obtain real gross domestic product and Table B.3, "Quantity and price indexes for gross domestic product, and percent changes, 1960-2009," to obtain the GDP implicit price deflator.

a. In an AD-AS graph, using the actual values for real GDP and the GDP implicit price deflator from the Economic Report of the President, show equilibrium for 1960 and for 2007. Assume that the economy was at equilibrium at potential GDP in both years. From 1960 to 2007, what happened to longrun aggregate supply? Given the increase in the GDP implicit price deflator, did aggregate demand grow more or less than longrun aggregate supply?

b. In an AD-AS graph, using the actual values for real GDP and the GDP implicit price deflator from the Economic Report of the President, show equilibrium for 1973 and for 1975. Assume that the economy was in equilibrium at potential GDP in 1973 but in only a short-run equilibrium in 1975. Given the changes in real GDP and the GDP implicit price deflator, what happened to short-run aggregate supply from 1973 to 1975?

Reference no: EM131303821

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