Final answer:
If demand unexpectedly increases in an economy with fully flexible prices, real GDP would tend to increase and unemployment would be low. Prices may be a concern if the demand increase leads to inflation, but flexible prices can mitigate this. A rightward shift in AS by 150 units would result in a new equilibrium with higher output and possibly lower prices.
Step-by-step explanation:
If an economy has fully flexible prices and demand unexpectedly increases, we would expect that the economy's real GDP would tend to increase. This is because with flexible prices, the economy can adjust quickly to increases in aggregate demand, allowing firms to raise production to meet the higher demand. Consequently, output would rise and real GDP would increase.
In terms of unemployment, we would expect it to be relatively low in this situation. As demand increases, firms tend to hire more workers to increase production, which reduces unemployment. Regarding prices, they might be a concern if the demand increase is sustained because producers could raise prices in response to higher demand, potentially leading to inflation. However, with completely flexible prices, the economy can adjust without significant delays, potentially mitigating such inflationary pressures.
When imagining a scenario where input prices fall and aggregate supply (AS) shifts to the right by 150 units, the new equilibrium would be at a higher quantity of output and potentially at a lower price level, assuming that the demand remains constant. The increase in AS would indicate that producers can supply more at every price level, which typically results in an increase in output and a decrease in price levels until a new equilibrium is reached.