Answer the following questions on the basis of the three sets of data for the co

Question

Answer the following questions on the basis of the three sets of data for the country of North Vaudeville Price Level 110 100 95 90 Real GDP 280 255 230 205 Price Level 100 100 100 100 Real GDP 205 230 255 280 Price Level 110 100 95 90 Real GDP 230 230 230 230 a. Which set of data illustrates aggregate supply in the immediate short-run in North Vaudeville? The data in (Click to select) Which set of data illustrates aggregate supply in the short run in North Vaudeville? The data in (Click to select) . Which set of data illustrates aggregate supply in the long run in North Vaudeville? The data in (Click to select) b. Assuming no change in hours of work, if real output per hour of work increases by 20 percent, what will be the new levels of real GDP in the right column of A? Instructions: Round your answers to 2 decimal places With a price level of 110, new output With a price level of 100, new output = With a price level of 95, new output = With a price level of 90, new output = Does the new data reflect an increase in aggregate supply or does it indicate a decrease in aggregate supply? (Click to select

Explanation / Answer

(a)

Aggregate supply in immediate short run - Data set A (In immediate short run, price level is fixed)

Aggregate supply in short run - Data set B (In immediate short run, real GDP rises with increase in price level)

Aggregate supply in long run - Data set C (In long run, real GDP is fixed)

(b) Real GDP will increase by 20% at every price level. For data set A,

With price level of 110, new output = 280 x 1.2 = 336.00

With price level of 100, new output = 255 x 1.2 = 306.00

With price level of 95, new output = 230 x 1.2 = 276.00

With price level of 90, new output = 205 x 1.2 = 246.00

The new data reflect an increase in aggregate supply (Since real GDP is higher at every price level).

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