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In the year 2020, aggregate demand and aggregate supply in the fictional country of Marjan are represented by the curves AD and AS on the following graph. Suppose Natural Real GDP in this economy is $s trillion. On the fallowing graph, use the green line (triangle symbal) to plot the long-run aggregate supply (LRAS) curve for this ecanomy. SRAS LRAS Odtcome C 101 AD REAL GOP (Trillons of dollars) Economists have forecast that if the govermment does nothing and the economy continues to grow at the current rate, aggregate demand in 2021 wll be given by the ADA curve, resulting in the outcome lustrated by point A. If the government pursues an expansionary policy, aggregate demand in 2021 will be given by the ADg curve, resulting in the outcome illustrated by point B. The following table gives projections for the unemployment rates that would occur at point A and point B. Consider what the rate of infation would be between 2020 and 2021, depending on whether the economy moves from the initial price level of 102 to the price level at outcome A or the price level at outcome B. Complete the table by entering the infation rate at cach potential outcome point. Note: Calculate the infation rate to two decimal points of predision. Unemployment Rate Inflation Rate 5% 2% PRICE LEVEL

In the year 2020, aggregate demand and aggregate supply in the fictional country of Marjan are represented by the curves AD and AS on the following graph. Suppose Natural Real GDP in this economy is $s trillion. On the fallowing graph, use the green line (triangle symbal) to plot the long-run aggregate supply (LRAS) curve for this ecanomy. SRAS LRAS Odtcome C 101 AD REAL GOP (Trillons of dollars) Economists have forecast that if the govermment does nothing and the economy continues to grow at the current rate, aggregate demand in 2021 wll be given by the ADA curve, resulting in the outcome lustrated by point A. If the government pursues an expansionary policy, aggregate demand in 2021 will be given by the ADg curve, resulting in the outcome illustrated by point B. The following table gives projections for the unemployment rates that would occur at point A and point B. Consider what the rate of infation would be between 2020 and 2021, depending on whether the economy moves from the initial price level of 102 to the price level at outcome A or the price level at outcome B. Complete the table by entering the infation rate at cach potential outcome point. Note: Calculate the infation rate to two decimal points of predision. Unemployment Rate Inflation Rate 5% 2% PRICE LEVEL

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Use the following graph to help you answer the questions that follow. (Note: You will not be graded for any adjustments made to this graph.) SRPC a1 LRPC UNEMPLOYMENT RATE (Percent) Based on your answers to the previous questions, use the black line (plus symbol) to draw the short-run Phillips curve for this economy in 2021 ( SRPC1). The short-run Phillips curve is line: Representing the tradeoff between unemployment and inflation O At Natural Real GDP At the natural rate of unemployment Now consider the long-run effects of this policy. Suppose, in particular, that following implementation of the policy, the aggregate demand curve remains at ADB. Designate the long-run equilibrium that would follow such a policy as outcome C. Going back to the first graph, place the grey point (star symbol) at outcome C. Because output at point Cis Natural Real GDP, the unemployment rate associated with outcome C is the natural rate of unemployment. Finally, use the green line (triangie symbol) to draw the long-run Phillips curve (LRPC) on the second graph. This line is line: O Representing the tradeoff between unemployment and inflation O At the natural rate of unemployment O At Natural Real GDP INFLATION RATE (Percert)
Transcribed Image Text:Use the following graph to help you answer the questions that follow. (Note: You will not be graded for any adjustments made to this graph.) SRPC a1 LRPC UNEMPLOYMENT RATE (Percent) Based on your answers to the previous questions, use the black line (plus symbol) to draw the short-run Phillips curve for this economy in 2021 ( SRPC1). The short-run Phillips curve is line: Representing the tradeoff between unemployment and inflation O At Natural Real GDP At the natural rate of unemployment Now consider the long-run effects of this policy. Suppose, in particular, that following implementation of the policy, the aggregate demand curve remains at ADB. Designate the long-run equilibrium that would follow such a policy as outcome C. Going back to the first graph, place the grey point (star symbol) at outcome C. Because output at point Cis Natural Real GDP, the unemployment rate associated with outcome C is the natural rate of unemployment. Finally, use the green line (triangie symbol) to draw the long-run Phillips curve (LRPC) on the second graph. This line is line: O Representing the tradeoff between unemployment and inflation O At the natural rate of unemployment O At Natural Real GDP INFLATION RATE (Percert)
In the year 2020, aggregate demand and aggregate supply in the fictional country of Marjan are represented by the curves ADn and AS on the following graph. Suppose Natural Real GDP in this economy is $8 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. 108 SRAS 107 LRAS 108 105 Outcome C 104 AD 103 102 AD. 101 100 4 S 10 12 14 16 REAL GDP (Trillians of dollars) Economists have forecast that if the govermment does nothing and the economy continues to grow at the current rate, aggregate demand in 2021 will be given by the ADA curve, resulting in the outcome illustrated by point A. Ir the government pursues an expansionary policy, aggregate demand in 2021 will be given by the ADB curve, resulting in the outcome illustrated by point B. The following table gives projections for the unemployment rates that would occur at point A and point B. Consider what the rate of inflation would be between 2020 and 2021, depending on whether the economy moves from the initial price level of 102 to the price level at outcome A or the price level at outcome B. Complete the table by entering the inflation rate at each potential outcome point. Note: Calculate the inflation rate to two decimal points of precision. Unemployment Rate Inflation Rate 5% B 2% Use the following graph to help you answer the questions that follow. (Note: You will not be graded for any adjustmments made to this graph.) PRICE LEVEL
Transcribed Image Text:In the year 2020, aggregate demand and aggregate supply in the fictional country of Marjan are represented by the curves ADn and AS on the following graph. Suppose Natural Real GDP in this economy is $8 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. 108 SRAS 107 LRAS 108 105 Outcome C 104 AD 103 102 AD. 101 100 4 S 10 12 14 16 REAL GDP (Trillians of dollars) Economists have forecast that if the govermment does nothing and the economy continues to grow at the current rate, aggregate demand in 2021 will be given by the ADA curve, resulting in the outcome illustrated by point A. Ir the government pursues an expansionary policy, aggregate demand in 2021 will be given by the ADB curve, resulting in the outcome illustrated by point B. The following table gives projections for the unemployment rates that would occur at point A and point B. Consider what the rate of inflation would be between 2020 and 2021, depending on whether the economy moves from the initial price level of 102 to the price level at outcome A or the price level at outcome B. Complete the table by entering the inflation rate at each potential outcome point. Note: Calculate the inflation rate to two decimal points of precision. Unemployment Rate Inflation Rate 5% B 2% Use the following graph to help you answer the questions that follow. (Note: You will not be graded for any adjustmments made to this graph.) PRICE LEVEL
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