Suppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADA to ADB. in the inflation rate and the short-run Phillips curve, resulting in in the This would cause a unemployment rate.
Suppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADA to ADB. in the inflation rate and the short-run Phillips curve, resulting in in the This would cause a unemployment rate.
Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment
Section: Chapter Questions
Problem 1CE
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Question
Aggregate demand, aggregate supply , and the Philips curve
Transcribed Image Text: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
0
0
1
2
3
5
6
UNEMPLOYMENT RATE (Percent)
4
♦
iMessage
Outcome A
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
in the
This would cause a
unemployment rate.
?
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Transcribed Image Text:PRICE LE
104
103
102
101
100
0
AD
2023
2
II
ADB
ADA
4 6 8
10
OUTPUT (Trillions of dollars)
A
12
14
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 lower unemployment rate (5%).
iMessage
16
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.
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