Use the figure below to answer the following questions.

Figure 28.1.3
-Refer to Figure 28.1.3.Assume that the figure illustrates an economy initially in equilibrium at the intersection of the SAS0 curve and the AD0 curve.If the aggregate demand curve is expected to remain at AD0 but shifts to AD1,the new equilibrium real GDP is ________ and the new equilibrium price level is ________.

Question

Use the figure below to answer the following questions.
  
Figure 28.1.3
-Refer to Figure 28.1.3.Assume that the figure illustrates an economy initially in equilibrium at the intersection of the SAS0 curve and the AD0 curve.If the aggregate demand curve is expected to remain at AD0 but shifts to AD1,the new equilibrium real GDP is ________ and the new equilibrium price level is ________.

Quizplus · Accepted Answer

When AD shifts from AD0 to AD1, the new equilibrium point is at the intersection of AD1 and SAS0 curve. The new equilibrium real GDP is where the AD1 curve intersects the SAS0 curve, which is at $620 billion. The new equilibrium price level is where the AD1 curve intersects the vertical axis (price level axis), which is at 125. The correct choice is D.

Use the Figure Below to Answer the Following Questions