12) The table below shows the aggregate demand and short run aggregate supply cu
ID: 1103328 • Letter: 1
Question
12) The table below shows the aggregate demand and short run aggregate supply curves for an economy. The potential level of output is $7.6 trillion. If policymakers adopt a nonintervention policy, the economy
13) The table below shows the aggregate demand and short run aggregate supply curves for an economy. The potential level of output is $7.6 trillion. If policymakers choose to close the gap by using stabilization policy, they should use
12) answer options:
A) would return to potential output at a price level of 2.8.
B) would return to potential output at a price level of 1.2.
C) would return to potential output at a price level of 2.0.
D) would return to long-run equilibrium at an output level of $6 trillion.
13) Answer options:
A) contractionary fiscal or monetary policies
B) expansionary fiscal or monetary policies.
C) a combination of contractionary fiscal and expansionary monetary policies.
D) a combination of expansionary fiscal and contractionary monetary policies.
Price Level Aggregate Quantity Demanded ($trillion) Aggregate Quantity supplied ($trillion) 1.0 7.8 4.8 1.2 7.6 5.2 1.4 7.4 5.6 1.6 7.2 6.0 1.8 7.0 6.4 2.0 6.8 6.8 2.2 6.6 7.0 2.4 6.4 7.2 2.6 6.2 7.4 2.8 6.0 7.6 3.0 5.8 7.8Explanation / Answer
12) The answer is C-) would return to potential output at a price level of 2.0.
because, at this price point of 2.0, the aggregate demand is equal to the aggregate quantity supplied.
13) The answer is B-) Expansionary fiscal or monetary policies.
because an expansionary policies raises the money supply in the economy which boost the economy by lowering the interest rate and increase borrowing boost the economy and thus increase aggregate demand.
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