Let the aggregate demand schedule be given by AD = 8,400 + 2,000/P and the potential GDP be equal to 10,000. The price level required to sustain equilibrium at potential GDP is then

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To find the price level required to sustain equilibrium at potential GDP, we set the aggregate demand (AD) equal to the potential GDP and solve for P. Given AD = 8,400 + 2,000/P and potential GDP = 10,000, we have 10,000 = 8,400 + 2,000/P. Solving for P gives P = 1.25.

Let the Aggregate Demand Schedule Be Given by AD =