Author Question: Refer to Table 19-18. What is nominal GDP in 2016 when 2011 is the base year? A) 28,885 B) 11,790 ... (Read 102 times)

jparksx · **on:** Jun 29, 2018

Refer to Table 19-18. What is nominal GDP in 2016 when 2011 is the base year?

A) 28,885 B) 11,790 C) 11,200 D) 10,275

Question 2

If the rate of inflation in the economy is steady at 5 percent per year, how does the short-run Phillips curve predict that the unemployment rate will be changing, if at all? Does your answer change if inflation in the economy is 0 percent?

Illustrate your answer with a Phillips curve.

prumorgan · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

If the rate of inflation is constant at 5 percent per year, then the price level is rising, but the unemployment rate should remain constant, as shown in the graph below (as long as inflation is at 5 percent, the unemployment rate does not change). If inflation is 0 percent, then the Phillips curve would predict that unemployment will be higher than it was when inflation was 5 percent (assuming no change in inflation expectations), but as long as inflation is constant at 5 percent, there will be no change in the unemployment rate.