The imaginary country of Harris Island has the aggregate supply and aggregate demand
Chapter 24, Problem 60(choose chapter or problem)
The imaginary country of Harris Island has the aggregate supply and aggregate demand curves as shown in Table 24.3. Price Level AD AS 100 700 200 120 600 325 140 500 500 160 400 570 180 300 620 Table 24.3 Price Level: AD/AS a. Plot the AD/AS diagram. Identify the equilibrium. b. Would you expect unemployment in this economy to be relatively high or low? c. Would you expect concern about inflation in this economy to be relatively high or low? d. Imagine that consumers begin to lose confidence about the state of the economy, and so AD becomes lower by 275 at every price level. Identify the new aggregate equilibrium. e. How will the shift in AD affect the original output, price level, and employment?
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