1. Aggregate demand, aggregate supply, and the Phillips curve In the year 2028, aggregate demand and aggregate supply in the fictional country of Gizmet are represented by the curves AD2028 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2029. The first potential aggregate-demand curve is given by the ADA curve, resulting in the outcome illustrated by point A. The second potential aggregate-demand curve is given by the ADB curve, resulting in the outcome illustrated by point B. PRICE LEVEL 108 107 106 105 104 103 102 101 AS ADB AD 2028 ADA 100 0 2 4 6 8 OUTPUT (Trillions of dollars) 10 12 14 16 Suppose the unemployment rate is 6% under one of these two outcomes and 3% under the other. Based on the previous graph, you would to be associated with the lower unemployment rate (3%). expect If aggregate demand is low in 2029, and the economy is at outcome A, the inflation rate between 2028 and 2029 is

1. Aggregate demand, aggregate supply, and the Phillips curve In the year 2028, aggregate demand and aggregate supply in the fictional country of Gizmet are represented by the curves AD2028 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2029. The first potential aggregate-demand curve is given by the ADA curve, resulting in the outcome illustrated by point A. The second potential aggregate-demand curve is given by the ADB curve, resulting in the outcome illustrated by point B. PRICE LEVEL 108 107 106 105 104 103 102 101 AS ADB AD 2028 ADA 100 0 2 4 6 8 OUTPUT (Trillions of dollars) 10 12 14 16 Suppose the unemployment rate is 6% under one of these two outcomes and 3% under the other. Based on the previous graph, you would to be associated with the lower unemployment rate (3%). expect If aggregate demand is low in 2029, and the economy is at outcome A, the inflation rate between 2028 and 2029 is

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: The Short-run Trade-off Between Inflation And Unemployment

Section: Chapter Questions

Problem 8PA

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1) According to the Phillips Curve, as unemployment falls what happens to inflation? Why? 2) According to the Phillips Curve, as unemployment rises what happents to inflaiton? Why? 3) According to the Aggregate Supply/ Aggrgeate Demand model, if AD increases what happebs to Price Level GDP and Unemployment 4) Accroding to the AS/AD model, if AD decreases what happens to PL, GDP and unemployment? 5) According to the AS/AD model if AS decreases what happens to PL GDP and unemployment? 6) Based on your answer to #5 how would you show the decrease in AS on the Philips Curve?
Aggregate demand, aggregate supply, and the Phillips curve In the year 2027, aggregate demand and aggregate supply in the imaginary country of Daisen-Oki are represented by the curves AD 2027 and AS on the following graph. The price level is currently 102. The graph also shows two potential outcomes for 2028. The first possible aggregate demand curve is given by the curve labeled AD(a) curve, resulting in the outcome given by point A. The second possible aggregate demand curve is given by the curve labeled AD(b), resulting in the outcome given by point B. Suppose the unemployment rate is 7% under one of these two outcomes and 6% under the other. Based on the previous graph, you would expect (OUTCOME A or OUTCOME B) to be associated with the higher unemployment rate (7%). If aggregate demand is high in 2028, and the economy is at outcome B, the inflation rate between 2027 and 2028 is (1.96% or 5.00% or 4.00% or 2.94%). Based on your answers to the previous…