Solved

The Following Table Gives a Numerical Example of the Inflation

Question 206

Essay

The following table gives a numerical example of the inflation adjustment line in the year 2017.  Real GDP (percent  deviation from potential  GDP)  Inflation (percent  per year) 2.01.55.01.05.00.55.00.05.00.55.01.05.01.55.02.05.0\begin{array} { | c | c | } \hline \begin{array} { c } \text { Real GDP (percent } \\\text { deviation from potential } \\\text { GDP) }\end{array} & \begin{array} { c } \text { Inflation (percent } \\\text { per year) }\end{array} \\\hline 2.0 & \\\hline 1.5 & 5.0 \\\hline 1.0 & 5.0 \\\hline 0.5 & 5.0 \\\hline 0.0 & 5.0 \\\hline - 0.5 & 5.0 \\\hline - 1.0 & 5.0 \\\hline - 1.5 & 5.0 \\\hline - 2.0 & 5.0 \\\hline\end{array} (A) Sketch the line in a graph.
(B) If real GDP is belaw potential GDP in the year 2017 , will the inflation adjustment line shift up ar down in the year 2018 ?
( C ) In the same graph as part (A), sketch an aggregate demand curve. Find the equilibrium level of inflation and real GDP in the year 2018.
(D) What will happen to the inflation adjustment line if ail prices sudkenly increase?

Correct Answer:

verifed

Verified

(A) The infletion adjustment (LA) hine i...

View Answer

Unlock this answer now
Get Access to more Verified Answers free of charge

Related Questions

Unlock this Answer For Free Now!

View this answer and more for free by performing one of the following actions

qr-code

Scan the QR code to install the App and get 2 free unlocks

upload documents

Unlock quizzes for free by uploading documents