Answer:
The new short-run macroeconomic equilibrium is $600 billion and no output gap.
Explanation:
The increase in demand of $50 billion is the rightward shift of aggregate demand as at each price level the demand increases by 50 units.
Price equilibrium was 110
where
Real GDP demanded = Real GDP supplied in the short run
575 = 575
As there is an increase in Real GDP demanded by 50 units so, their is an output gap of 50 units at price 110.
Resulting the increase in quantity demanded
The new equilibrium price is 120
Where
Quantity demanded = 550 + 50 = 600
Quantity supplied = 600
There is no output gap.
