Graph the following aggregate supply and demand curves (be sure to draw to scale).
Real GDP (in $ trillions)
Price Level Supplied Demanded Increase / Decrease
100 4 16
110 10 15
140 14 12
200 15 6
To graph the aggregate supply (AS) and aggregate demand (AD) curves, follow these steps:
1. Set up your graph paper with the price level on the vertical axis (y-axis) and the real GDP on the horizontal axis (x-axis). Make sure to label the axes appropriately.
2. Plot the points for the AS curve. Plot the supplied real GDP values on the x-axis and the corresponding price level values on the y-axis. For example, for a price level of 100, the supplied real GDP is 4. Plot this point on your graph.
3. Connect the points plotted for the AS curve with a smooth curve. This curve represents the aggregate supply curve.
4. Plot the points for the AD curve. Plot the demanded real GDP values on the x-axis and the corresponding price level values on the y-axis. For example, for a price level of 100, the demanded real GDP is 16. Plot this point on your graph.
5. Connect the points plotted for the AD curve with a smooth curve. This curve represents the aggregate demand curve.
6. Label the AS curve as "AS" and the AD curve as "AD" on the graph.
Now, let's apply these steps to the given data:
AS curve:
- Plot the points (4, 100), (10, 110), (14, 140), and (15, 200) on your graph.
AD curve:
- Plot the points (16, 100), (15, 110), (12, 140), and (6, 200) on your graph.
Connect the points for both curves with smooth curves. Label the AS curve as "AS" and the AD curve as "AD" on the graph.
Remember to scale the axes appropriately to ensure accuracy in representing the data.