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When a pandemic strikes the Australian economy, many businesses are temporarily closed, aggregate demand (AD) falls because people are staying at home rather than spending at those businesses. Because those businesses cannot produce goods and services, both of the short-run GDP and the economy’s potential GDP, as reflected in the SRAS and LRAS curve, fall as well. Use the following graph to answer these questions.   a)Calculate the actual real GDP growth and inflation rate in 2020.  b)In the long run, will inflation be expected to rise or fall and why?

When a pandemic strikes the Australian economy, many businesses are temporarily closed, aggregate demand (AD) falls because people are staying at home rather than spending at those businesses. Because those businesses cannot produce goods and services, both of the short-run GDP and the economy’s potential GDP, as reflected in the SRAS and LRAS curve, fall as well. Use the following graph to answer these questions.   a)Calculate the actual real GDP growth and inflation rate in 2020.  b)In the long run, will inflation be expected to rise or fall and why?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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When a pandemic strikes the Australian economy, many businesses are temporarily closed, aggregate demand (AD) falls because people are staying at home rather than spending at those businesses. Because those businesses cannot produce goods and services, both of the short-run GDP and the economy’s potential GDP, as reflected in the SRAS and LRAS curve, fall as well. Use the following graph to answer these questions.

 

a)Calculate the actual real GDP growth and inflation rate in 2020. 

b)In the long run, will inflation be expected to rise or fall and why?

LRAS2025 LRAS2019 Price level SRAS2020 SRAS2019 120 107 100 AD2020 with policy AD2019 AD2020 without policy 452865 493000 509677 Real GDP ($ millions)
Transcribed Image Text:LRAS2025 LRAS2019 Price level SRAS2020 SRAS2019 120 107 100 AD2020 with policy AD2019 AD2020 without policy 452865 493000 509677 Real GDP ($ millions)
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