**Title: Exploring Aggregate Demand and Supply in the Economy of Marjan**In the year 2023, aggregate demand and aggregate supply in the fictional country of Marjan are represented by the curves $AD_{2023}$ and AS on the following graph.Suppose the natural level of output in this economy is $10 trillion.**Graph Analysis:**The graph features the following key elements:- **Vertical Axis (Y-Axis):** Price Level (ranging from 100 to 108)- **Horizontal Axis (X-Axis):** Output (Trillions of dollars, ranging from 0 to 16) - **Curves:** - **AD$_{2023}$ (Aggregate Demand 2023):** A downward-sloping blue line representing the aggregate demand for the year 2023. - **AS (Aggregate Supply):** An upward-sloping orange line representing the aggregate supply in the economy. - **AD$_A$:** A blue dashed line indicating a potential future position of the aggregate demand curve if economic conditions change.- **Points of Interest:** - **Point A:** Intersection of the AS and AD$_A$ lines. - **Point B:** Intersection of the AS and AD$_{2023}$ lines. - **LRAS (Long-Run Aggregate Supply):** Represented by the green line (triangle symbol) at $10 trillion output, suggesting the natural level of output.- **Outcome C:** Represented by a star symbol, indicating an alternative economic condition.**Forecast:**Economists have forecast that if the government does nothing and the economy continues to grow at the current rate, aggregate demand in 2024 will be given by the $AD_A$ curve, resulting in the outcome illustrated by point A. If the government pursues a contractionary policy, aggregate demand in 2024 may align closer with the $AD_B$ curve.This graph illustrates various potential scenarios for how aggregate demand and supply can interact to determine the price level and output in the economy. Understanding these relationships is crucial for informed policy-making and economic planning. The image contains a paragraph of text followed by a table. Here's the transcription suitable for an educational website:---**Text Explanation:**The paragraph discusses the impact of economic policies on aggregate demand and potential outcomes for unemployment rates. It explains that if a contractionary policy is pursued, the aggregate demand in 2024 will shift from being represented by the $AD_A$ curve to the $AD_B$ curve, resulting in different outcomes illustrated by points A and B.**Task Description:**The task is to project future unemployment rates at points A and B, with an analysis of how inflation rates will change as the economy transitions from a price level of 102 to the different price outcomes at points B and A.**Table:**- Title: Unemployment Rate and Inflation Rate Projections- The table has two columns: 1. **Unemployment Rate**: Specifies the potential unemployment rates at two performance points, A and B. 2. **Inflation Rate**: A blank section where the corresponding inflation rates need to be calculated and entered.**Table Entries:**| Unemployment Rate | Inflation Rate ||-------------------|----------------|| A: 2% | || B: 5% | |**Instructions:**Complete the table by entering the inflation rate at each potential outcome point.**Note:**Calculate the inflation rate to two decimal points of precision.--- This transcription is designed to provide a clear understanding of the task and concepts for educational purposes.

Given, Natural level of output = $10 trillionThe long-run aggregate supply is shown by the below diagram, In the above figure, the long-run aggregate supply curve is shown by the green line. The initial level of price is $102 and at point A the price level is $105. The inflation rate can be computed as: Inflation rate = price level at point A – initial price level initial price level ×100 =105-102102 ×100 =2.94% Thus, the inflation rate at point A is 2.94% or 3% approx. Similarly, at point B, price level is 103. Inflation rate = price level at point B – initial price levelinitial price level ×100 =103-102102×100 =0.98% Thus, the inflation rate at point B is 0.98% or 1% approx.

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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 2023 and 2024, depending on whether the economy moves from the initial price level of 102 to the price level at outcome B or the price level at outcome A. 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 2% % B 5%

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 2023 and 2024, depending on whether the economy moves from the initial price level of 102 to the price level at outcome B or the price level at outcome A. 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 2% % B 5%

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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