Question

2. unempl %	aqq. supply
   2	520
   3	510
   4	500
   5	490
   6	480
   7	470
   8	460
   9	450
   10	440

1.Increasing aggregate supply means increasing/decreasing unemployment.

2.To keep unemployment below 6%, more than _ GDP must be supplied.

inflat %                 agg demand

8                              200

3.6                          423

2                              500

1.3                          536

.9                             556

.6                             567

.5                             575

3.Rising inflation increases/decreases aggregate demand.

4.To keep demand above 500, inflation must be kept below _

Answer 1

1. Increasing aggregate supply means decreasing unemployment.

From top to bottom, as the unemployment increases, the aggregate supply decreases.

2. To keep unemployment below 6%, more than 480 GDP must be supplied.

At 6% unemployment, the GDP supplied is 480, and hence, more than 480 is required for unemployment to be below 6%.

3. Rising inflation decreases aggregate demand.

From top to bottom, as inflation decreases, aggregate demand increases.

4. To keep demand above 500, inflation must be kept below 2%.

At 2% inflation, the aggregate demand is 500, and hence, only above 500 the inflation would be lower than 2%.