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QUESTION

Using the hypothetical economy data in the table below, calculate the aggregate demand and supply, as well as its price level.

Then address the following:

a)    What is the equilibrium price level and the equilibrium level of real output in this hypothetical economy? Use Excel to graph both the aggregate demand and aggregate supply curves. Can there be equilibrium level of output at below full employment?

b)    At what price level will aggregate supply equal aggregate demand? At what price level will demand fall below aggregate supply? If given a price level of 300, will aggregate demand exceed supply?

c)    If the aggregate demand schedule shifted by $20 billion to the right at every level, what would be the new equilibrium level of income?

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