In the year 2020, aggregate demand and aggregate supply in the fictional country of Bartak are represented by the curves AD020 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2021. 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 106 107 106 B 105 104 AD 2020 103 102 101 AS ADA ADB 100 4 10 12 14 OUTPUT (Trillions of dollars) ? Suppose the unemployment rate is 6% under one of these two outcomes and 3% under the other. Based on the previous graph, you would expect to be associated with the lower unemployment rate (3%). outcome B emand is high in 2021, and the economy is at outcome B, the inflation rate between 2020 and 2021 is outcome A Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and inflation rate if the economy is at point A. Next, use the green point (triangle symbol) to plot the unemployment rate and inflation rate if the economy is at point B. (As you place these points, dashed drop lines will automatically extend to both axes.) Finally, use the black line (plus symbol) to draw the short-run Phillips curve for this economy in 2021.
In the year 2020, aggregate demand and aggregate supply in the fictional country of Bartak are represented by the curves AD020 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2021. 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 106 107 106 B 105 104 AD 2020 103 102 101 AS ADA ADB 100 4 10 12 14 OUTPUT (Trillions of dollars) ? Suppose the unemployment rate is 6% under one of these two outcomes and 3% under the other. Based on the previous graph, you would expect to be associated with the lower unemployment rate (3%). outcome B emand is high in 2021, and the economy is at outcome B, the inflation rate between 2020 and 2021 is outcome A Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and inflation rate if the economy is at point A. Next, use the green point (triangle symbol) to plot the unemployment rate and inflation rate if the economy is at point B. (As you place these points, dashed drop lines will automatically extend to both axes.) Finally, use the black line (plus symbol) to draw the short-run Phillips curve for this economy in 2021.
Chapter22: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
Problem 4P
Related questions
Question
Transcribed Image Text:INFLATION RATE (Percent)
Suppose the unemployment rate is 6% under one of these two outcomes and 3% under the other. Based on the previous graph, you would expect
to be associated with the lower unemployment rate (3%).
If aggregate demand is high in 2021, and the economy is at outcome B, the inflation rate between 2020 and 2021 is
Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to p
inflation rate if the economy is at point A. Next, use the green point (triangle symbol) to plot the unemployment rate
is at point B. (As you place these points, dashed drop lines will automatically extend to both axes.) Finally, use the b
the short-run Phillips curve for this economy in 2021.
0.98%
2.94%
3.00%
5.00%
0
0
1
2
3
unemployment rate.
5
UNEMPLOYMENT RATE (Percent)
Outcome A
Outcome B
Phillips Curve
employment rate and
ion rate if the economy
plus symbol) to draw
Suppose that the government is considering enacting an expansionary policy in 2020 that would shift aggregate demand in 2021 from ADA to ADB.
This would cause a
the short-run Phillips curve, resulting in
in the inflation rate and
in the
Transcribed Image Text:Homework: Chapter 27
1. Aggregate demand, aggregate supply, and the Phillips curve
In the year 2020, aggregate demand and aggregate supply in the fictional country of Bartak are represented by the curves AD20 and AS on the
following graph. The price level is 102. The graph also shows two possible outcomes for 2021. 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
106
AS
107
106
B
105
104
AD 2020
103
102
101
19V
100
D
10
AD
OUTPUT (Trillions of dollars)
ADB
12
14
(?)
Suppose the unemployment rate is 6% under one of these two outcomes and 3% under the other. Based on the previous graph, you would expect
to be associated with the lower unemployment rate (3%).
outcome B
outcome A
emand is high in 2021, and the economy is at outcome B, the inflation rate between 2020 and 2021 is
Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and
inflation rate if the economy is at point A. Next, use the green point (triangle symbol) to plot the unemployment rate and inflation rate if the economy
is at point B. (As you place these points, dashed drop lines will automatically extend to both axes) Finally, use the black line (plus symbol) to draw
the short-run Phillips curve for this economy in 2021.
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