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AP Macroeconomics 5.2 The Phillips Curve Questions

Use SRPC and LRPC graphs to locate macroeconomic equilibria and analyse how demand, supply, expectations, and natural unemployment change outcomes.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • draw a downward SRPC and vertical LRPC at the natural rate using correct axes
  • plot numerical inflation-unemployment equilibria and classify recessionary or inflationary gaps
  • contrast the short-run inflation-unemployment trade-off with no trade-off in the long run
  • move along SRPC for expansionary or contractionary aggregate-demand shocks
  • shift SRPC for favourable or adverse aggregate-supply shocks

Covered syllabus points

MOD-3.A—a. Define (using graphs as appropriate) the short-run Phillips curve and the long-run Phillips curve. b. Explain (using graphs as…MOD-3.B—Explain (using graphs as appropriate) the response of unemployment and inflation in the short run and in the long run

Question 1

[Maximum number: 3]

Assume that the economy of Barrikos is in short-run equilibrium, with its economic data summarized in the table provided. The government budget is balanced, and the capital and financial account (CFA) balance is zero.

Table for Question 1 — AP Macroeconomics

Question (a)

(a)

Using the relevant numerical values, draw a correctly labeled graph of the short-run and long-run Phillips curves for Barrikos. Indicate the current short-run equilibrium with a point labeled X. Plot the relevant numerical values on the graph.

[ 2 ]

Question (b)

(b)

Assume that the fiscal policy action identified in part C is implemented.

[ 1 ]

Question (i)

(i)

Assume there is no change in inflationary expectations. On your graph in part B, show a possible new short-run equilibrium point, labeled Z, that would result from the fiscal policy action identified in part C.

[ 1 ]
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