Question

Please help! Due this Sunday!

Review the problem in the Work It Out titled "Interpreting the AD/AS Model “ (Textbook, chapter 11).
Like the information provided in that feature, Table 11.2 shows information on aggregate supply, aggregate demand, and the price level for the imaginary country of Xurbia. (use the “Work It Out” as reference)
a. Plot the AD/AS diagram from the data. Identify the equilibrium.
b. Imagine that, because of a government tax cut, aggregate demand becomes higher by 50 at every price level. Identify the new equilibrium.
c. How will the new equilibrium alter output? How will it alter the price level? What do you think will happen to employment?

Answer 1

Answer:

Aggregate demand and aggregate supply determine equilibrium price and output.

Explanation:

In an economy only aggregate demand or aggregate supply cannot determine the equillibrum price.

Looking at the attached diagram, aggregate demand I'd negatively sloping and aggregate supply is positively sloped.

Where they intersect determines the equillibrum price and equillibrum quantity.

Aggregate demand is the total demand for God's and services in an economy, and has an inverse relationship to price.

Aggregate supply is total supply of goods and services to consumers, and it has a direct relationship with price.