Refer to Table 19-18. What is real GDP in 2016, using 2016 as the ...

[joesmith1212]

Refer to Table 19-18. What is real GDP in 2016, using 2016 as the base year?
 
  A) 28,885 B) 11,790 C) 11,200 D) 10,275

Question 2

If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year?
 
  Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.

[chereeb]

Answer to Question 1

B

Answer to Question 2

If the unemployment rate is constant at 4 percent per year, the inflation rate should remain constant, as shown in the graph below (as long as the unemployment rate is 4 percent, the inflation rate does not change). If the unemployment rate rises to 7 percent, then the Phillips curve would predict that the inflation rate will be lower than it was when unemployment was 4 percent.