I is economy IS In a recessIonary yap wrieı ure aciuai GUP IS Delow pouu DIIIIUI. b. Explain why wages rise when output is greater than potential but fall when output is less than potential. When there is a recessionary gap, if there is no intervention in the economy the level of actual unemployment will rise above the natural level of unemployment in the economy. Thus, there will be more competition among workers to find a job, which will put downward pressure on the level of wages. Fril curve 1- c. For each situation, fill in the table by identifying whether the AS curve shifts up, down, or is stationary. Real GDP Rate of Shift of 760 770 780 7E0o a10 s20 B30o 840 B50 Situation (billions Wage of dollars) Change AS Curve A 760 3.0 % shifts down B 780 1.5 % shifts down 800 0.0 % is stationary D 820 1.0 % shifts up 845 2.0 % shifts up Level of GDP d. Use the multipoint drawing tool to plot and label the Phillips curve on a scale diagram for this economy. Use all and only the points provided in the table above. Carefully follow the instructions above, and only draw the required objects. This Phillips curve shows the relationship between O A. price and output. O B. the rate of wage change and unemployment. Oc. output and unemployment. O D. price and unemployment.
I is economy IS In a recessIonary yap wrieı ure aciuai GUP IS Delow pouu DIIIIUI. b. Explain why wages rise when output is greater than potential but fall when output is less than potential. When there is a recessionary gap, if there is no intervention in the economy the level of actual unemployment will rise above the natural level of unemployment in the economy. Thus, there will be more competition among workers to find a job, which will put downward pressure on the level of wages. Fril curve 1- c. For each situation, fill in the table by identifying whether the AS curve shifts up, down, or is stationary. Real GDP Rate of Shift of 760 770 780 7E0o a10 s20 B30o 840 B50 Situation (billions Wage of dollars) Change AS Curve A 760 3.0 % shifts down B 780 1.5 % shifts down 800 0.0 % is stationary D 820 1.0 % shifts up 845 2.0 % shifts up Level of GDP d. Use the multipoint drawing tool to plot and label the Phillips curve on a scale diagram for this economy. Use all and only the points provided in the table above. Carefully follow the instructions above, and only draw the required objects. This Phillips curve shows the relationship between O A. price and output. O B. the rate of wage change and unemployment. Oc. output and unemployment. O D. price and unemployment.
Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations
Section: Chapter Questions
Problem 7P
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Transcribed Image Text:I is economy IS In a recessIonary yap wrieı ure aciuai GUP IS Delow pouu DIIIIUI.
b. Explain why wages rise when output is greater than potential but fall when output is less than potential.
When there is a recessionary gap, if there is no intervention in the economy the level of actual unemployment will
rise above the natural level of unemployment in the economy. Thus, there will be more competition among
workers to find a job, which will put downward pressure on the level of wages.
1-
c. For each situation, fill in the table by identifying whether the AS curve shifts up, down, or is stationary.
Real GDP Rate of
Shift of
760 770 780 7E0o a10 s20 B30o 840 B50
Situation (billions
Wage
of dollars) Change
AS Curve
A
760
3.0 %
shifts down
B
780
1.5 % shifts down
800
0.0 %
is stationary
D
820
1.0 %
shifts up
845
2.0 % shifts up
Level of GDP
d. Use the multipoint drawing tool to plot and label the Phillips curve on a scale diagram for this economy. Use all and
only the points provided in the table above.
Carefully follow the instructions above, and only draw the required objects.
This Phillips curve shows the relationship between
O A. price and output.
O B. the rate of wage change and unemployment.
Oc. output and unemployment.
O D. price and unemployment.
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