The Following Table Gives a Numerical Example of the Inflation

question 66

Essay

The following table gives a numerical example of the inflation adjustment line in the year 2017. $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Real GDP (percent } \\\text { deviation from potential } \\\text { GDP) }\end{array} & \begin{array} { c } \text { Inflation (percent } \\\text { per year) }\end{array} \\\hline 2.0 & \\\hline 1.5 & 5.0 \\\hline 1.0 & 5.0 \\\hline 0.5 & 5.0 \\\hline 0.0 & 5.0 \\\hline - 0.5 & 5.0 \\\hline - 1.0 & 5.0 \\\hline - 1.5 & 5.0 \\\hline - 2.0 & 5.0 \\\hline\end{array}$$ (A) Sketch the line in a graph.
(B) If real GDP is belaw potential GDP in the year 2017 , will the inflation adjustment line shift up ar down in the year 2018 ?
( 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 2018.
(D) What will happen to the inflation adjustment line if ail prices sudkenly increase?

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