Assume that the Potential GDP in the economy of Peruggia is $750 and that the aggregate demand and aggregate supply are as shown below:
a)What is the value of equilibrium GDP and the price level? What type of macroeconomic equilibrium exists?
b)Suppose that a serious firestorm hits parts of the country reducing its aggregate supply by $130.What will be the new values of equilibrium GDP and the price level?
c)What type of gap now exists and what is its size.

Question

Assume that the Potential GDP in the economy of Peruggia is $750 and that the aggregate demand and aggregate supply are as shown below:
  a)What is the value of equilibrium GDP and the price level? What type of macroeconomic equilibrium exists?
b)Suppose that a serious firestorm hits parts of the country reducing its aggregate supply by $130.What will be the new values of equilibrium GDP and the price level?
c)What type of gap now exists and what is its size.

Quizplus · Accepted Answer

The Answer of Assume that the Potential GDP in the economy of Peruggia is $750 and that the aggregate demand and aggregate supply are as shown below:
  a)What is the value of equilibrium GDP and the price level? What type of macroeconomic equilibrium exists?
b)Suppose that a serious firestorm hits parts of the country reducing its aggregate supply by $130.What will be the new values of equilibrium GDP and the price level?
c)What type of gap now exists and what is its size.

Assume That the Potential GDP in the Economy of Peruggia