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?
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter22: Inflation
Section: Chapter Questions
Problem 17RQ: Over the last century, during what periods was the U.S. inflation late highest and lowest?
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PART 2
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
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?
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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