Suppose that government expenditures decrease by 12 from 20 to 8. Fill out column (3) of the Table. Find the new short-run equilibrium real GDP, inflation rate, and the growth rate of nominal wages.

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter22: Inflation
Section: Chapter Questions
Problem 3SCQ: Compute the inflation rate for fruit prices from 2001 to 2004.
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Suppose that government expenditures decrease by 12 from 20 to 8.

Fill out column (3) of the Table. Find the new short-run equilibrium real GDP, inflation rate, and the growth rate of nominal wages.

Inflation Aggregat e
Quantity
Aggregate Aggregate
Quantity
Dermanded (Expected
(G=8)
Aggregate
Quantity Supplied
(Expected
Rate
Quantity Supplied
Demanded
(G=20)
Inflation Rate=5%) Inflation Rate=2%)
-1
108
84
93
106
86
94
1
104
88
95
2.
102
90
96
3
100
92
97
4
98
94
99
5
96
100
96
6.
94
98
102
7
92
100
104
Transcribed Image Text:Inflation Aggregat e Quantity Aggregate Aggregate Quantity Dermanded (Expected (G=8) Aggregate Quantity Supplied (Expected Rate Quantity Supplied Demanded (G=20) Inflation Rate=5%) Inflation Rate=2%) -1 108 84 93 106 86 94 1 104 88 95 2. 102 90 96 3 100 92 97 4 98 94 99 5 96 100 96 6. 94 98 102 7 92 100 104
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