Math/Physic/Economic/Statistic Problems
#1: Draw and carefully describe a graph that utilizes the Aggregate Demand/Aggregate Supply model that would illustrate the current state of the aggregate economy in the United States as of October 2021. The Aggregate Demand/Aggregate Supply Model is first introduced in Chapter 11 (Links to an external site.) of your text and is further explicated in Chapters 12 and 13. Make sure that you explain your graph in your own words. Illustrate the current state of the economy relative to real potential GDP (Links to an external site.).
How big is the gap between actual and potential real GDP?
For information about how to embed an image in a discussion and reply see: (Links to an external site.)
Draw your graph rather than cut and paste from an outside source. Graphs that are simply copy and pasted from other sources including your text will be penalized at least 4 points.
#2: As you have learned consumer expectations (Links to an external site.) are a major driver of the short run path of the economy. Consumer spending account fors about 70% of GDP and consumer confidence (Links to an external site.) is a major factor in shifting Aggregate Demand. Describe how your expectations about the economy have changed because of Covid-19.
How did you alter your spending patterns during this pandemic? Do you expect consumer confidence and business expectations to improve in the months ahead? Utilizing the equation GDP= C+I+G+ (X-M) from Chapter 6 what is your forecast for which way the AD curve will shift between now and the end of 2021? Why?
Here is a figure from your text that you can model and adapt in framing your response:
Macro Equilibrium with recessionary gap from text
In Q3 of 2021 the price level is about 119 with a base year of 2012. Real GDP is about $19.5 trillion and potential real GDP is about $19.8 trillion so there is an output gap of about $300 billion.
