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^IT’s a two step question !* Step1 An economy’s AD (Aggregate Demand) function is Y = 1000...

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Statistics

^IT’s a two step question !*


Step1
An economy’s AD (Aggregate Demand) function is Y = 1000 – 2Pand AS (Aggregate Supply) function is P = 20 + 0.1Y. Show these twolines in a graph. Label graphs. Find the equilibrium price level(P) and GDP (Y) and show them on the graph.

Step 2
Use the AS and AD curves to illustrate your points and discussthe effects of the following events on the price level and on theequilibrium GDP (Y) in the short run:
a) The labor unions negotiate with the government and succeedin increasing the minimum wage.
b) Consumer confidence drops due to an increase ingas-price.

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