Figure 13.1 Alt text for Figure 13.1: In figure 13.1, a short-run Phillips curve.
Long description for Figure 13.1: The x-axis is labelled, unemployment rate percent, and the y-axis is labelled, inflation rate percent per year.A straight line labelled, Philips curve, begins at the top left corner and slopes down to the end of the x-axis.Point A is plotted half way along the line.Point B is plotted to the right of point A.Point C is plotted is to the left of point A.Point D is plotted above this line, in the left center of the quadrant.Point E is plotted below this line, directly beneath point A.
-Refer to Figure 13.1.Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above, and the unemployment rate at A is the natural rate.If the economy was to move to point C, which of the following must be true?

Question

Figure 13.1  Alt text for Figure 13.1: In figure 13.1, a short-run Phillips curve.
Long description for Figure 13.1: The x-axis is labelled, unemployment rate percent, and the y-axis is labelled, inflation rate percent per year.A straight line labelled, Philips curve, begins at the top left corner and slopes down to the end of the x-axis.Point A is plotted half way along the line.Point B is plotted to the right of point A.Point C is plotted is to the left of point A.Point D is plotted above this line, in the left center of the quadrant.Point E is plotted below this line, directly beneath point A.
-Refer to Figure 13.1.Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above, and the unemployment rate at A is the natural rate.If the economy was to move to point C, which of the following must be true?

Quizplus · Accepted Answer

Equilibrium GDP at point C must be above potential GDP.

Figure 131 Alt Text for Figure 13