Figure 17-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate.

-Refer to Figure 17-1. Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012, and those two points correspond to points B and C, respectively, on the left-hand graph. Also suppose we know that the price index equaled 120 in 2011. Then the numbers 115 and 130 on the vertical axis of the left-hand graph would have to be replaced by

Question

Figure 17-1. The left-hand graph shows a short-run aggregate-supply (SRAS) curve and two aggregate-demand (AD) curves. On the right-hand diagram, U represents the unemployment rate.
 
-Refer to Figure 17-1. Suppose points F and G on the right-hand graph represent two possible outcomes for an imaginary economy in the year 2012, and those two points correspond to points B and C, respectively, on the left-hand graph. Also suppose we know that the price index equaled 120 in 2011. Then the numbers 115 and 130 on the vertical axis of the left-hand graph would have to be replaced by

Quizplus · Accepted Answer

Since the price index increased from 120 to 130, there was a 8.33% increase in the price level. To find the new values for SRAS, we can multiply the original values by 1.0833. Thus, 115 x 1.0833 = 124.5 and 130 x 1.0833 = 140.83. Rounded to the nearest whole number, these values become 125 and 141, respectively. Therefore, the new values for the vertical axis of the left-hand graph would be 125 and 141. Only option B contains these values.