(Solved): In the year 2023, aggregate demand and aggregate supply in the fictional country of Drooble are repr ...

In the year 2023, aggregate demand and aggregate supply in the fictional country of Drooble are represented by the curves AD2023AD2023 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2024. The first potential aggregate demand curve is given by the ADAADA curve, resulting in the outcome illustrated by point A. The second potential aggregate demand curve is given by the ADBADB curve, resulting in the outcome illustrated by point B.

Suppose the unemployment rate is 6% under one of these two outcomes and 5% under the other. Based on the previous graph, you would expect _______________(Choices: outcome A or B) to be associated with the lower unemployment rate (5%).

If aggregate demand is low in 2024, and the economy is at outcome A, the inflation rate between 2023 and 2024 is __________ (Choices: 4.00%, 2.94%, 5.00%, 1.96%. 

Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and inflation rate if the economy is at point A. Next, use the green point (triangle symbol) to plot the unemployment rate and inflation rate if the economy is at point B. (As you place these points, dashed drop lines will automatically extend to both axes.) Finally, use the black line (cross symbol) to draw the short-run Phillips curve for this economy in 2024.

Note: For graphing pruposes, round the inflation rate under each outcome to the nearest whole percent. For example, round 1.9% to 2.0%.

Hint: Hover your cursor over each point after you plot it to make sure you have placed it on the exact coordinate you intended.

Suppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADAADA to ADBADB. This would cause a __________(choices: movement along, shift on)    the short-run Phillips curve, resulting in __________(Choices:  a increase, a decrease) in the inflation rate and ___________(Choices:  a increase, a decrease)   in the unemployment rate.