Suppose that the graph below shows an aggregate demand-aggregate supply (AD-AS)

Question

Suppose that the graph below shows an aggregate demand-aggregate supply (AD-AS) model of the U.S. economy at the end of the third quarter of 2008 and at the end of the year 2008. The figures given on the graph are roughly consistent with actual data. You may notice that, for simplicity, an assumption was made that expectations of the price level were unchanged over the period. Use the graph to answer the questions on this page. The following graph shows an AD-AS representation for the U.S. economy whose real natural rate of output is assumed to be $12 trillion. The curves are labeled A, B, C, and D. Identify which curve on the graph above corresponds to each of the following descriptions. If the curve described is not shown on the graph, choose "Not Shown." Tool tip: Move your mouse icon over the circles on the graph to find coordinates for completing the blanks in the sentences below. From the graph above, U.S. real GDP____by about____billion from the third quarter of 2008 to the fourth quarter of 2008 and the price level____by about_____.

Explanation / Answer

1. Is not shown. Since AS curve as an effect is not shown.

2. Answer is D. As the AD is depicted as D in the graph.

3. fourth quarter is not described nor the data is given. However, we can asume B to be so as it is shown as a change over.

4. There is no shift in AS. Hence, it is also not shown.

From the graph, Real GDP is the product of output and price level. It has increased by $102 ($1551- $1449)

The price level increased from $6 (132-126)

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.