Assume that the economy begins in short-run equilibrium as shown in the graph below. Graph the effect on the equilibrium price level (PL) and real GDP (Y) if there is a decrease in aggregate demand (AD). Label the equilibrium price level and real GDP after the decrease in aggregate demand as PL2 and Y2.

Assume that the economy begins in short-run equilibrium as shown in the graph below. Graph the effect on the equilibrium price level (PL) and real GDP (Y) if there is a decrease in aggregate demand (AD). Label the equilibrium price level and real GDP after the decrease in aggregate demand as PL2 and Y2.

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Dynamic Change, Economic Fluctuations, And The Ad-as Model

Section: Chapter Questions

Problem 12CQ

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