Suppose that the aggregate demand curve in a particular year is given by the algebraic ...

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Suppose that the aggregate demand curve in a particular year is given by the algebraic       expression: Y = XXXXXXXXXX/P, where Y is the aggregate output and P is the       price level as given by the GDP Deflator. Potential GDP (Y*) = XXXXXXXXXXa. Plot aggregate demand and long run aggregate supply curves.    Show aggregate demand schedule. (2 Marks)
	
Document Preview: Suppose that the aggregate demand curve in a particular year is given by the algebraic  XXXXXXXXXXexpression:  Y = XXXXXXXXXX/P, where Y is the aggregate output and P is the XXXXXXXXXXprice level as given by the GDP Deflator.  Potential GDP (Y*) = 4000.Plot aggregate demand and long run aggregate supply curves.     Show aggregate demand schedule. (2 Marks)

David · Accepted Answer

Suppose that the aggregate demand curve in a particular year is given by the algebraic  
          expression:  Y = 3000 + 1000/P, where Y is the aggregate output and P is the 
          price level as given by the GDP Deflator.  Potential GDP (Y
*
) = 4000. 
1. Plot aggregate demand and long run aggregate supply curves.  
            Show aggregate demand schedule. (2 Marks) 
Answer: 
Aggregate demand curve and long run aggregate supply curves have been graphed in the figure 
below: 
Figure1:
The aggregate demand schedule has been given below; 
Price (P) output/Income (Y) 
0.2 8000 
0.4 5500 
0.6 4666.666667 
0.8 4250 
1 4000 
2 3500 
3 3333.333333 
4 3250 
5 3200 
6 3166.666667 
7 3142.

Suppose that the aggregate demand curve in a particular year is given by the algebraic expression: Y = XXXXXXXXXX/P, where Y is the aggregate output and P is the price level as given by the GDP...

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