Figure 16-3

question 14

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. In the Phillips phase of the inflation-unemployment cycle,

• A) aggregate demand is stagnant.
• B) real GDP rises in each successive period.
• C) inflation and unemployment fall in each successive period.
• D) real GDP falls in each successive period.

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Definitions:

Restatement

The act of rephrasing or reiterating something, often for clarity, or in law, a document that systematically presents legal rules and principles.

Reasonable Means

Methods or actions that are considered sensible and appropriate under the circumstances, often used in the context of achieving a specific legal or procedural outcome.

Motorcycle

A two-wheeled motor vehicle that is often used for transportation, recreation, or sport.

Seven Days

A period consisting of one week, often used in the context of deadlines or time frames for actions or events.