Econ 214 Questions Problem Set 1

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4. Consider an economy with the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Decision-makers have previously made decisions anticipating that the price level during the current period will be P105.

a. Indicate the quantity of GDP that will be produced during the period.

b. Is it a long-run equilibrium level of GDP? Why or why not?

c. How will the unemployment rate during the current period compare with the natural rate of unemployment?

d. Will the current rate of GDP be sustainable into the future? Why or why not?

AD

105

Price Level

SRAS105

6300

90

4500

6000

95

4800

5700

100

5100

5400

105

5400

5100

110

5700

4800

115

6000


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(Top Tutor) Daniel C.
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School: UCLA
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