Figure 24-4

-Refer to Figure 24-4. In the figure above,AD₁, LRAS₁ and SRAS₁ denote AD,LRAS and SRAS in year 1,while AD₂,LRAS₂ and SRAS₂ denote AD,LRAS and SRAS in year 2. Given the economy is at point A in year 1,what is the actual growth rate in GDP in year 2?

Question

Figure 24-4
 
-Refer to Figure 24-4. In the figure above,AD₁, LRAS₁ and SRAS₁ denote AD,LRAS and SRAS in year 1,while AD₂,LRAS₂ and SRAS₂ denote AD,LRAS and SRAS in year 2. Given the economy is at point A in year 1,what is the actual growth rate in GDP in year 2?

Quizplus · Accepted Answer

From the figure, we can see that the shift in AD from AD₁ to AD₂ is 20%, and the resulting shift in equilibrium GDP from Y₁ to Y₂ is approximately 7.3% [(Y₂-Y₁)/Y₁ x 100%]. Therefore, the actual growth rate in GDP in year 2 is approximately 7.3%. Choice B is the best answer.

Figure 24-4 -Refer to Figure 24-4. in the Figure Above,AD₁, LRAS₁ and Figure