If aggregate demand is low in 2024, and the economy is at outcome A, the inflation rate between 2023 and 2024 is Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and inflation rate if the economy is at point A. Next, use the green point (triangle symbol) to plot the unemployment rate and inflation rate if the economy is at point B. (As you place these points, dashed drop lines will automatically extend to both axes.) Finally, use the black line (cross symbol) to draw the short-run Phillips curve for this economy in 2024. Note: For graphing pruposes, round the inflation rate under each outcome to the nearest whole percent. For example, round 1.9% to 2.0%. Hint: Hover your cursor over each point after you plot it to make sure you have placed it on the exact coordinate you intended. INFLATION RATE (Percent) 8 7 6 2 19 1 0 0 1 2 3 5 6 UNEMPLOYMENT RATE (Percent) 7 8 Outcome A Outcome B Phillips Curve Suppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADA to ADB. the short-run Phillips curve, resulting in in the inflation rate and This would cause a in the unemployment rate.
If aggregate demand is low in 2024, and the economy is at outcome A, the inflation rate between 2023 and 2024 is Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and inflation rate if the economy is at point A. Next, use the green point (triangle symbol) to plot the unemployment rate and inflation rate if the economy is at point B. (As you place these points, dashed drop lines will automatically extend to both axes.) Finally, use the black line (cross symbol) to draw the short-run Phillips curve for this economy in 2024. Note: For graphing pruposes, round the inflation rate under each outcome to the nearest whole percent. For example, round 1.9% to 2.0%. Hint: Hover your cursor over each point after you plot it to make sure you have placed it on the exact coordinate you intended. INFLATION RATE (Percent) 8 7 6 2 19 1 0 0 1 2 3 5 6 UNEMPLOYMENT RATE (Percent) 7 8 Outcome A Outcome B Phillips Curve Suppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADA to ADB. the short-run Phillips curve, resulting in in the inflation rate and This would cause a in the unemployment rate.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Transcribed Image Text:If aggregate demand is low in 2024, and the economy is at outcome A, the inflation rate between 2023 and 2024 is
Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and
inflation rate if the economy is at point A. Next, use the green point (triangle symbol) to plot the unemployment rate and inflation rate if the economy
is at point B. (As you place these points, dashed drop lines will automatically extend to both axes.) Finally, use the black line (cross symbol) to draw
the short-run Phillips curve for this economy in 2024.
Note: For graphing pruposes, round the inflation rate under each outcome to the nearest whole percent. For example, round 1.9% to 2.0%.
Hint: Hover your cursor over each point after you plot it to make sure you have placed it on the exact coordinate you intended.
INFLATION RATE (Percent)
8
7
6
2
19
1
0
0
1
2
3
5
6
UNEMPLOYMENT RATE (Percent)
7
8
Outcome A
Outcome B
Phillips Curve
Suppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADA to ADB.
the short-run Phillips curve, resulting in
in the inflation rate and
This would cause a
in the
unemployment rate.
Transcribed Image Text:1. Aggregate demand, aggregate supply, and the Phillips curve
In the year 2023, aggregate demand and aggregate supply in the fictional country of Gizmet are represented by the curves AD2023 and AS on the
following graph. The price level is 102. The graph also shows two possible outcomes for 2024. The first potential aggregate demand curve is given by
the ADA curve, resulting in the outcome illustrated by point A. The second potential aggregate demand curve is given by the ADB curve, resulting in
the outcome illustrated by point B.
PRICE LEVEL
108
107
106
106
104
103
102
101
100
0
AD
2023
2
B
AS
ADB
ADA
4 6 8 10
OUTPUT (Trillions of dollars)
12
14
16
Suppose the unemployment rate is 7% under one of these two outcomes and 5% under the other. Based on the previous graph, you would expect
to be associated with the higher unemployment rate (7%).
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