Use an aggregate demand and supply diagram to illustrate and explain how each of the following will affect the equilibrium price level and the real GDP. Describe and analyze the new situation (inflationary gap, recessionary gap, stagflation). How should the situation be rectified in order to return to full employment? • Consumers expect a recession • Foreign income rises • Foreign price levels fall • Government spending increases • Workers expect high future inflation and negotiate higher prices now • Technological improvement increase productivity QUESTION: How should the situation be rectified in order to return to full employment?
Use an aggregate demand and supply diagram to illustrate and explain how each of the following will affect the equilibrium price level and the real GDP. Describe and analyze the new situation (inflationary gap, recessionary gap, stagflation). How should the situation be rectified in order to return to full employment? • Consumers expect a recession • Foreign income rises • Foreign price levels fall • Government spending increases • Workers expect high future inflation and negotiate higher prices now • Technological improvement increase productivity QUESTION: How should the situation be rectified in order to return to full employment?
Chapter20: Aggregate Demand And Supply
Section: Chapter Questions
Problem 3SQP
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Use an aggregate
• Consumers expect a recession
• Foreign income rises
• Foreign price levels fall
• Government spending increases
• Workers expect high future inflation and negotiate higher prices now
• Technological improvement increase productivity
QUESTION: How should the situation be rectified in order to return to full employment?
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