Question

1. draw this graph with a multi point line

Inflation Rate (%) Unemployment Rate (%) 5 2 3 4 1 6 0 7 Use the data in the accompanying table and the multi-point line tool to plot a short-run Phillips curve and label it "PC."

2.

Deflation can be a problem because it:
	leads to higher wages. makes it more difficult to pay off debt. can easily become hyperinflation. increases interest rates.

3.

The idea that a change in the money supply would affect prices but not real GDP is associated with the:
	monetary equivalence theory. GDP impossibility rule. classical monetary transmission mechanism. law of unintended consequences.

4.

	In the equation of exchange, the term P × Q is the same as:
	the money supply. nominal GDP. national income. real GDP.

Answer 1

1.

= TI o W - Short Run phillips curne. o = 4 6 IT unemployment Rate

2(B)

Deflation makes it more difficult for debtors to pay off their debts.

3. (C)

Reason In the classical monetary transmission mechanism, where change in the money supply also affects the price level but does not affect the real variables like output, employment and income. my. there is direct and mechanical relationship between money and prices but does not affect real gdp.

4. (B) nominal GDP.

nominal GDP is can be calculated by multiplying current price of goods and services and quantity produced in the current year in all over economy. nominal gdp = price * quantity.