Subpart (a): Explanation The reason for shifting the aggregate demand and aggregate supply is reduction in consumer spending. The effect of fall in consumer spending on aggregate supply, aggregate demand, and Phillips curve is shown below. Figure 1 shows the shift in aggregate supply and aggregate demand curves. A B Figure 1 Subpart (b): To determine TheEffect of change in consumer spending on aggregate supply, aggregate demand and Phillips curve.

TheEffect of change in consumer spending on aggregate supply , aggregate demand and Phillips curve .

Principles of Economics (MindTap Course List)

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ISBN: 9781305585126

Author: N. Gregory Mankiw

Publisher: Cengage Learning

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Question

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

Chapter 35, Problem 3PA

Subpart (a):

To determine

TheEffect of change in consumer spending on aggregate supply, aggregate demand and Phillips curve.

Subpart (b):

To determine

TheEffect of change in consumer spending on aggregate supply, aggregate demand and Phillips curve.

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Chapter 35, Problem 2PA

Chapter 35, Problem 4PA

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