The following table has data on aggregate demand and short-run aggregate supply.
Price Level
AD (billions)
SRAS (billions)
25
$700
$100
50
600
200
75
500
300
100
400
400
125
300
500
150
200
600
175
100
700
Graph the aggregate demand and short-run supply curves.Suppose the economy is in long-run equilibrium but policymakers erroneously believe that the full-employment level of GDP is $600 billion.What is likely to happen in this economy?
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