Question

Question 1 (15 Marks) Table below shows aggregate demand and supply schedules for an imaginary economy. Real domestic output demanded Price level Real domestic output supplied (RM billions) (RM billions) 3000 350 9000 4000 300 8000 5000 250 7000 6000 200 6000 7000 150 5000 8000 100 4000 A. Using the data in the table, graph the aggregate demand and aggregate supply curves for this economy. (7 Marks) B. Determine the equilibrium price level and output for this economy in your graph. (2 Marks) C. Illustrate the market implication if the price level in this economy is 150. (2 Marks) D. Illustrate the effect on the market equilibrium price and output if the demand increases by RM 400 billion at each price level. (4 Marks)

Answer 1

A. 400 3507 taas 750 E 200 150 100 PAD 50 1 1 0 1 000 2002 300 yos 500 6000 7000 San 9000 1000 11,000 where B. The Equilibrium point is AD and AS intersect, at E. Equilibrum price = 200 Equilibrium quantity : RM 6 000 billion c. 9 price level is 150 then AD more than AS. AD 7ooo 5000 AS = This i and the supply people demand more means ابوها by the AD cuwe D. of demand increases Rm 400 billion at each price level sugt outwards which w û increase the equilibrium price well as equilibrin output