The Following Table Gives a Numerical Example of the Inflation

question 62

Essay

The following table gives a numerical example of the inflation adjustment line in the year 2007. (A)Sketch the line in a graph.
(B)If real GDP is below potential GDP in the year 2007, will the inflation adjustment line shift up or down in the year 2008?
(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 2008.
(D)What will happen to the inflation adjustment line if oil prices suddenly increase?

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