Answer Happy

In the year 2023, aggregate demand and aggregate supply in the fictional country of Drooble are represented by the curves AD2023 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2024. 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. 108 107 AS 106 105 104 103 102 101 100 PRICE LEVEL 0 AD 2023 2 B A II II ADA II M 10 12 4 6 8 OUTPUT (Trillions of dollars) ADB 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 expect outcome A to be associated with the higher unemployment rate (6%). If aggregate demand is high in 2024, and the economy is at outcome B, the inflation rate between 2023 and 2024 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 (cross symbol) to draw the short-run Phillips curve for this economy in 2024. Note: For graphing pruposes, round the inflation rate under each outcome to the nearest whole percent. For example, round 1.9% to 2.0%. Hint: Hover your cursor over each point after you plot it to make sure you have placed it on the exact coordinate you intended. 8 7 Outcome A Outcome B Phillips Curve TION RATE (Percent)
Hint: Hover your cursor over each point after you plot it to make sure you have placed it on the exact coordinate you intended. ? 8 7 Outcome A Outcome B Phillips Curve 0 2 3 4 5 6 8 UNEMPLOYMENT RATE (Percent) Suppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADA to ADB. the short-run Phillips curve, resulting in in the inflation rate and This would cause a in the unemployment rate. INFLATION RATE (Percent) 6 1 0 1 7