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Aggregate Demand (AD) And Long-Run Aggregate Supply

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4. 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.
The quantity during the current period is 5400. b. Is it a long-run equilibrium level of GDP? Why or why not?
Yes, it is considered a long-run equilibrium level because the AD and the SRAS intersect. c. How will the unemployment rate during the current period compare with the natural rate of unemployment? It will be in line with the natural rate of unemployment because the natural rate occurs when the aggregate supply of labor is equal to the aggregate demand for labor, which would occur in a time of equal AD and SRAS. d. Will the current rate of GDP be sustainable into the future? Why or why not? No, it is not sustainable into the future; in order for an economy to grow the levels of supply and demand must fluctuate.

AD105 | Price Level | SRAS 105 | 6300 | 90 | 4500 | 6000 | 95 | 4800 | 5700 | 100 | 5100 | 5400 | 105 | 5400

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