Question

Consider the following schedule to find the macro equilibrium. What is the equilibrium level of GDP and price level?

Current Price Level Real GDP - Quantity Demanded per Trillion Real GDP - Quantity Supplied per Trillion
250 28.5 18.7
210 25.0 20.0
200 23.5 23.5
150 20.1 21.2

(a) GDP: 23.5, Price Level: 200
(b) GDP: 20.1, Price Level: 150
(c) GDP: 25.0, Price Level: 210
(d) GDP: 28.5, Price Level: 250

Answer 1

The correct answer is option (a) GDP: 23.5, Price Level: 200.

Step-by-step explanation:

To find the equilibrium level of GDP and price level, we should look for the point where the quantity demanded is equal to the quantity supplied. In the provided schedule, we can identify this point by comparing the Real GDP - Quantity Demanded per Trillion and Real GDP - Quantity Supplied per Trillion for different price levels.

Here is a breakdown of the data given:

• At a price level of 250, quantity demanded is 28.5 trillion and quantity supplied is 18.7 trillion.
• At a price level of 210, quantity demanded is 25.0 trillion and quantity supplied is 20.0 trillion.
• At a price level of 200, quantity demanded is 23.5 trillion and quantity supplied is also 23.5 trillion.
• At a price level of 150, quantity demanded is 20.1 trillion and quantity supplied is 21.2 trillion.

Thus, the equilibrium level where quantity demanded equals quantity supplied is at a real GDP of 23.5 trillion and a price level of 200. Therefore, the correct answer is (a) GDP: 23.5, Price Level: 200.