Use the hypothetical economy data in the table below to answer the following questions.

| November 24, 2016

Use the hypothetical economy data in the table below to answer the following questions.

Amount of Real GDP Demand, in Billions

Price Level

(Price Index)

Amount of Real GDP Supplied, in Billions

$180

300

$500

260

250

400

300

200

300

420

150

200

560

100

100

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 FALL BELOW [equal] aggregate demand? At what price level will demand fall below aggregate supply? If given a price level of 250, will aggregate demand exceed supply?

c) If the aggregate demand schedule shifted by $140 billion to the right at every level, what would be the new equilibrium level of income?

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