AP Macroeconomics Mod 3 B Explain Using Graphs As Appropriate the Response of Unemployment and Inflation in the Short Run and in the Long Run Questions

Translate demand, supply, and expectation shocks into SRPC movements or shifts, then explain long-run adjustment and changes in natural unemployment.

Exam points

show an expansionary demand shock moving left and up along a fixed SRPC
show a contractionary demand shock moving right and down along a fixed SRPC
shift SRPC for a favourable or adverse aggregate-supply shock rather than moving along it
shift SRPC right for higher expected inflation or left for lower expected inflation
compare actual with expected inflation to locate unemployment relative to its natural rate

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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 AP Macroeconomics Mod 3 B Explain Using Graphs As Appropriate the Response of Unemployment and Inflation in the Short Run and in the Long Run Questions question 1 — AP Macroeconomics

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

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.

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AP Macroeconomics Mod 3 B Explain Using Graphs As Appropriate the Response of Unemployment and Inflation in the Short Run and in the Long Run Questions question 1