The Bright Economic Outlook: Prices and Output Levels

What can we expect from the prices and output levels of this economy?

Is the economy poised for growth and stability in terms of prices and output levels?

Final answer:

In the given economy at the equilibrium price level of 90 with an output level of 8,800, unemployment should be low, and price concerns would be relatively small. A shift in the AS to the right by 150 units due to a fall in input prices would result in a new equilibrium with a higher output and a lower price level.

Explanation:

The question is regarding aggregate supply (AS) and aggregate demand (AD) in the context of macroeconomics. At an equilibrium price level of 90, the economy reaches equilibrium output at 8,800. This indicates that there is no excess supply or demand.

Unemployment is expected to be low at this level of output because the economy is producing at a point where AS equals AD, which is typically associated with full employment.

Price concerns in this economy would be relatively small as the equilibrium suggests that supply and demand are balanced, implying no upward pressure on prices.

If input prices fall, shifting the AS curve to the right by 150 units, a new equilibrium will be established. The output will increase, and the price level will decrease, potentially reducing unemployment further, thanks to the increased economic activity.