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For the imaginary economy of Xurbia, a table lists aggregate demand and aggregate supply at several price levels. At a price level of 130, aggregate demand equals $680 and aggregate supply also equals $680. What does this tell you about that price level?
AIt is the equilibrium price level, with real GDP of $680
BIt is below equilibrium, so a shortage of output exists
CIt is above equilibrium, so a surplus of output exists
DIt is irrelevant, since equilibrium requires a graph, not a table
Answer & Solution
Correct answer: A. It is the equilibrium price level, with real GDP of $680
1. Equilibrium in the AD/AS model occurs where aggregate demand equals aggregate supply.
2. At price level 130, both AD and AS equal $680, so the two sides of the market match exactly.
3. That match is exactly the definition of the macroeconomic equilibrium price level and output.
4. The equilibrium can be read directly from a table of AD and AS values, so option D is wrong.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 10 "The Aggregate Demand/Aggregate Supply Model", section 10.2 | Building a Model of Aggregate Demand and Aggregate Supply_
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