Figure 16-3

question 102

Multiple Choice

Figure 16-3
Panel (a) Panel (b) Suppose the level of potential output (Y_P) is $1,000 billion and the natural rate of unemployment is 5%. In Panel (a) , the aggregate demand curve in Period 1 is AD₁. Assume that the price level in Period 1 has risen by 1.5% from the previous period and the unemployment rate is 10%. Thus, in Panel (b) point F shows an initial rate of inflation of 1.5% and an unemployment rate of 10%. Similarly, point b in Panel (a) corresponds to point G in Panel (b) and point d in Panel (a) corresponds to point H in Panel (b) .
-Refer to Figure 16-3. The Phillips phase of the inflation-unemployment cycle is explained

• A) by a stagnant short-run aggregate supply curve.
• B) by leftward shifts of the aggregate demand curve in each successive period.
• C) by upward shifts along the LRAS curve in each successive period.
• D) by rightward shifts of the aggregate demand curve in each successive period.

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Definitions:

Collective Unconscious Theory

Carl Jung's concept that posits the existence of a shared, inherited reservoir of memories from our ancestors.

Social Drift Theory

A theory suggesting that individuals with severe mental illness tend to move downward in social class, contributing to or exacerbating their conditions.

Endophenotype

A measurable component unseen by the unaided eye along the pathway between disease and distal genotype, helping to link genetic mutations to complex behaviors.

Vulnerability Markers

Genetic, biochemical, or psychological traits that can make an individual more susceptible to developing certain disorders or diseases.