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?
AD105 Price Level SRAS 105
6300 90 4500
6000 95 4800
5700 100 5100
5400 105 5400
5100 110 5700
4800 115 6000