owing graph plots aggregate demand (ADar) and aggregate supply (AS) for the imaginary country of Patagonia in the year 2027. the natural level of output in this economy is $6 trillion. following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. plete the table by entering the inflation rate at each potential outcome point. Calculate the inflation rate to two decimal points of precision. Unemployment Rate 3% 5% Inflation Rate LRAS AS AD ADE 12 14 16 OUTPUT (Trillions of dollars) 43 +1 Outcome C ists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will the curve labeled ADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate in 2028 will be given by the curve labeled ADg, resulting in the outcome given by point B. >wing table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of Inflation 12027 and 2028, depending on whether the economy moves from the initial price level of 102 to the price level at outcome A or the price le ime B. At the natural level of output ○ At the natural rate of unemployment Representing the tradeoff between unemployment and inflation d on your answers to the preceding parts, use the black line (plus symbol) to draw the short-run Phillips curve (SRPC) for this economy in 2028 e: You will not be graded on any changes you make to this graph.) INFLATION RATE (Percent) 7 1 0 U 1 4 8 8 UNEMPLOYMENT RATE (Percent) SRPC LRPC 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. The long-run equilibrium that would follow such a policy is designated outcome C. Going back to the first graph, place the grey point (star symbol) at outcome C. the natural level of output, the unemployment rate associated with outcome C is Because output at point C is the natural rate of unemployment. Finally, use the green line (triangle symbol) to draw the long-run Phillips curve (LRPC) on the second graph. This line is line: Representing the tradeoff between unemployment and inflation At the natural rate of unemployment
owing graph plots aggregate demand (ADar) and aggregate supply (AS) for the imaginary country of Patagonia in the year 2027. the natural level of output in this economy is $6 trillion. following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. plete the table by entering the inflation rate at each potential outcome point. Calculate the inflation rate to two decimal points of precision. Unemployment Rate 3% 5% Inflation Rate LRAS AS AD ADE 12 14 16 OUTPUT (Trillions of dollars) 43 +1 Outcome C ists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will the curve labeled ADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate in 2028 will be given by the curve labeled ADg, resulting in the outcome given by point B. >wing table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of Inflation 12027 and 2028, depending on whether the economy moves from the initial price level of 102 to the price level at outcome A or the price le ime B. At the natural level of output ○ At the natural rate of unemployment Representing the tradeoff between unemployment and inflation d on your answers to the preceding parts, use the black line (plus symbol) to draw the short-run Phillips curve (SRPC) for this economy in 2028 e: You will not be graded on any changes you make to this graph.) INFLATION RATE (Percent) 7 1 0 U 1 4 8 8 UNEMPLOYMENT RATE (Percent) SRPC LRPC 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. The long-run equilibrium that would follow such a policy is designated outcome C. Going back to the first graph, place the grey point (star symbol) at outcome C. the natural level of output, the unemployment rate associated with outcome C is Because output at point C is the natural rate of unemployment. Finally, use the green line (triangle symbol) to draw the long-run Phillips curve (LRPC) on the second graph. This line is line: Representing the tradeoff between unemployment and inflation At the natural rate of unemployment
Chapter13: Inflation
Section: Chapter Questions
Problem 7SQ
Question
please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
Transcribed Image Text:owing graph plots aggregate demand (ADar) and aggregate supply (AS) for the imaginary country of Patagonia in the year 2027.
the natural level of output in this economy is $6 trillion.
following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy.
plete the table by entering the inflation rate at each potential outcome point.
Calculate the inflation rate to two decimal points of precision.
Unemployment Rate
3%
5%
Inflation Rate
LRAS
AS
AD
ADE
12
14
16
OUTPUT (Trillions of dollars)
43 +1
Outcome C
ists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2028 will
the curve labeled ADA, resulting in the outcome given by point A. If, however, the government pursues an expansionary policy, aggregate
in 2028 will be given by the curve labeled ADg, resulting in the outcome given by point B.
>wing table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of Inflation
12027 and 2028, depending on whether the economy moves from the initial price level of 102 to the price level at outcome A or the price le
ime B.
At the natural level of output
○ At the natural rate of unemployment
Representing the tradeoff between unemployment and inflation
d on your answers to the preceding parts, use the black line (plus symbol) to draw the short-run Phillips curve (SRPC) for this economy in 2028
e: You will not be graded on any changes you make to this graph.)
INFLATION RATE (Percent)
7
1
0
U
1
4
8
8
UNEMPLOYMENT RATE (Percent)
SRPC
LRPC
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. The long-run equilibrium that would follow such a policy is designated outcome C.
Going back to the first graph, place the grey point (star symbol) at outcome C.
the natural level of output, the unemployment rate associated with outcome C is
Because output at point C is
the natural rate of unemployment.
Finally, use the green line (triangle symbol) to draw the long-run Phillips curve (LRPC) on the second graph.
This line is
line:
Representing the tradeoff between unemployment and inflation
At the natural rate of unemployment
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