Consider an economy with the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules.

  Consider an economy with the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Decision-makers have previously made...

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4.      Consider an economy with the following aggregate demand (AD) and short-run aggregate supply (SRAS) schedules. Decision-makers have previously made decisions anticipating that the price level during the current period will be P105.

a.       Indicate the quantity of GDP that will be produced during the period.

b.      Is it a long-run equilibrium level of GDP? Why or why not?

c.       How will the unemployment rate during the current period compare with the natural rate of             unemployment?

d.      Will the current rate of GDP be sustainable into the future? Why or why not?

AD 105	Price Level	SRAS105
6300	90	4500
6000	95	4800
5700	100	5100
5400	105	5400
5100	110	5700
4800	115	6000

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