Question 1 Suppose the aggregate demand (AD) relationship is given by the linear relationship, P = 250 – 1.5Y and that t

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Question 1 Suppose the aggregate demand (AD) relationship is given by the linear relationship, P = 250 – 1.5Y and that t

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Question 1
Suppose the aggregate demand (AD) relationship is given by the
linear relationship,
P = 250 – 1.5Y and that the short-run aggregate supply (SRAS) is
given by the linear relationship,
P = 50 + 0.5Y, where P is the GDP deflator, an index number; and
Y is real GDP in units of £1bn.
Calculate the macroeconomic equilibrium in terms of P and Y. (5
marks)
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