Explain the relationship between the aggregate expenditures model in graph (A)below and the aggregate demand model in graph (B)below where aggregate demand is shifting.
Definitions:
COLA
Cost of Living Adjustment, an increase in income to keep up with living expenses, often applied to salaries and benefits to offset inflation.
Misery Index
An economic indicator created by summing the unemployment rate and the inflation rate, intended to measure the average citizen's financial hardship.
Unanticipated Inflation
Inflation that occurs when people do not expect it, leading to negative impacts on savings and purchasing power.
Disinflation
A slowdown in the rate of increase of the general price level of goods and services over time.
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