Homework answers / question archive / Suppose that the economy is self-regulating, that the price level is 110, that the quantity demanded of Real GDP is RM10 trillion, that the quantity supplied of Real GDP in the short run is RM5 trillion, and that the quantity supplied of Real GDP in the long run is RM4 trillion

Suppose that the economy is self-regulating, that the price level is 110, that the quantity demanded of Real GDP is RM10 trillion, that the quantity supplied of Real GDP in the short run is RM5 trillion, and that the quantity supplied of Real GDP in the long run is RM4 trillion

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Suppose that the economy is self-regulating, that the price level

is 110, that the quantity demanded of Real GDP is RM10 trillion, that the quantity supplied of Real GDP in the short run is RM5 trillion, and that the quantity supplied of Real GDP in the long run is RM4 trillion.
a. Draw a complete graph to summarize the situation above. (7 marks)
b. Is the economy in short-run equilibrium? Why? (3 marks)
c. Will the price level in long-run equilibrium be greater than, less than, or equal to 110? Explain. (5 marks)