The Building Blocks of Neoclassical Analysis

Problems

Use Table to answer the following questions.

Price LevelAggregate SupplyAggregate Demand
903,0003,500
953,0003,000
1003,0002,500
1053,0002,200
1103,0002,100
  1. Sketch an aggregate supply and aggregate demand diagram.
  2. What is the equilibrium output and price level?
  3. If aggregate demand shifts right, what is equilibrium output?
  4. If aggregate demand shifts left, what is equilibrium output?
  5. In this scenario, would you suggest using aggregate demand to alter the level of output or to control any inflationary increases in the price level?