Quantitative Literacy Assignment
Aggregate Supply &Aggregate Demand
Consider the table below for the aggregate supply and aggregate demand for goods and services in the United States.
|
Price Level - P (Y Axis)
|
Real GDP Demanded in billions (AD)
|
Real GDP Supplied in billions (AS)
|
|
50
|
16,300
|
15,100
|
|
60
|
16,200
|
15,200
|
|
70
|
16,100
|
15,300
|
|
80
|
16,000
|
15,400
|
|
90
|
15,900
|
15,500
|
|
100
|
15,800
|
15,600
|
|
110
|
15,700
|
15,700
|
|
120
|
15,600
|
15,800
|
|
130
|
15,500
|
15,900
|
|
140
|
15,400
|
16,000
|
|
150
|
15,300
|
16,100
|
|
160
|
15,200
|
16,200
|
|
170
|
15,100
|
16,300
|
Use the following Table for Excel Graph's:
|
Real GDP in billions
|
Price Level - P AS (Y Axis)
|
Price Level - P AD (Y Axis)
|
|
15,100
|
50
|
170
|
|
15,200
|
60
|
160
|
|
15,300
|
70
|
150
|
|
15,400
|
80
|
140
|
|
15,500
|
90
|
130
|
|
15,600
|
100
|
120
|
|
15,700
|
110
|
110
|
|
15,800
|
120
|
100
|
|
15,900
|
130
|
90
|
|
16,000
|
140
|
80
|
|
16,100
|
150
|
70
|
|
16,200
|
160
|
60
|
|
16,300
|
170
|
50
|
1. On the grid below, create a graph depicting the U.S. economy using the table above, andplotthe AD and the AS.(Use EXCEL to plot the graph on a separate sheet if possible, but not required. Use titles on the graph, axes, and curves; USE X axis for Real GDP and Y axis for price level.).
2. Explain using 3-4 well written sentences, two of the reasons the AD curve is negatively sloped. In your explanation, use numerical examples for the price level and Real GDP changes. In addition, using 2-3 well written sentences and numerical examples, explain one of the reasons that theaggregate supply curveis positively sloped in the short-run.
3. Using the graph created from the data in the table, determine the short-run equilibrium price level and level of output. Explain using 2-3 well written sentences how this equilibrium point is determined and include the numerical values.
4. From your graph, explain using 2-3 sentences how an increase in real GDPcould occur in the economy and give a specific written real world scenario or example. Include the resulting effect on price levels and give the correct terminology that corresponds to this type of price level change.
5. On your existing graph, draw what would happen if : 1) crude oil prices fell slightly in addition to 2) stock and housing prices declined sharply. Explainthe result using 2-3 sentences and include numerical examples from your new graphical outcome. Compare the new position of theaggregate supply and demand curves, and the new short-run equilibrium compared to the old one.