Problem
Use the following aggregate supply schedule to draw the short-run supply curve on the graph below. QAS 100 200 300 400 500 600 700 T800 900 900 Price 20 20 25 30 40 50 60 80 100 110 120 100 100 900 1000 1300 1200 Real GDP.
a. Add the demand curve to your graph if demand is, QAD 700-10P.
b. What are the short-run, macroeconomic equilibrium real GDP and average price level?
c. Suppose the full-employment level of output or potential GDP is 600. What kind of problem is the economy experiencing and how big is the GDP gap?
d. If the marginal propensity to consume is 0.75, how much government spending would be required to increase aggregate demand by the amount of the original GDP gap?
e. Draw a new aggregate demand curve on your graph to illustrate the change described in part d. ls the new equilibrium at full-employment?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.