1. Aggregate demand, aggregate supply, and the Phillips curve In the year 2027, aggregate demand and aggregate supply in the imaginary country of Daisen-Oki are represented by the curves AD2027 and AS on the following graph. The price level is currently 102. The graph also shows two potential outcomes for 2028. The first possible aggregate demand curve is given by the curve labeled ADA curve, resulting in the outcome given by point A. The second possible aggregate demand curve is given by the curve labeled ADB, resulting in the outcome given by point B. (? 108 107 AS 106 B 105 A PRICE LEVEL AD 2027 103 ADB 102 ADA 101 100 14 16 0 2 6 8 10 12 OUTPUT (Trillions of dollars)Suppose the unemployment rate is 6% under one of these two outcomes and 3% under the other. Based on the previous graph, you would expect V to be associated with the higher unemployment rate (6%). If aggregate demand is high in 2028, and the economyr is at outcome E5, the ination rate between 2027 and 2023 is V . Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and ination rate if the economy is at point .4. 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 shortrun Phillips curve for this economy in 2028. Note: For graphing pruposesr round the ination rate under each outcome to the nearest whole percent. For example, round 1.9% to 2.0%. Suppose the unemployment rate is 6% under one of these two outcomes and 3% under the other. Based on the previous graph, you would expect V to be associated with the higher unemployment rate (euro). outcome B emancl is high in 2028, and the economy is at outcome B, the ination rate between 202?lr and 2023 is V . outcome A Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to plot the unemployment rate and ination 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 Jpoint B. (As you place these points, dashed drop lines will automatically extend to both axesi) Finally, use the black line (cross symbol) to draw the shortrun Phillips curve for this economy in 2028. If aggregate demand is high in 2028, and the economy is at outcome B, the inflation rate between 2027 and 2028 is 4.00% Based on your answers to the previous questions, on the following graph use the purple point (diamond symbol) to p employment rate and 2.94% inflation rate if the economy is at point A. Next, use the green point (triangle symbol) to plot the unemployment rate tion 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 bi 1.96% cross symbol) to draw the short-run Phillips curve for this economy in 2028. 5.00% Note: For graphing pruposes, round the inflation rate under each outcome to the nearest whole percent. For example, round 1.9% to 2.0%.Suppose that the government is considering enacting an expansionary policyr in 202? that would shift aggregate demand in 2028 from ADA to ADD. This would cause a V the shortrun Phillips curve, resulting in V in the inflation rate and V in the unemployment rate. an increase a decrease Suppose that the government is considering enacting an expansionary policy in 202 hift aggregate demand in 2028 from ADA to ADB. This would cause a the short-run Phillips curve, resulting in in the inflation rate and in the unemployment rate.UN EMPLOYMENT RATE (Percent) an increase a decrease Suppose that the government is considering enacting an expansionary policyr in 202? that would shift aggregate demand in 2| to ADD. This would cause a V the shortrun Phillips curve. resulting in V in the inflation rate and in the unemployment rate. 7. The costs of disinflation The following graph plots the short-run and long-run Phillips curves (SRPC and LRPC, respectively) for an economy currently experiencing long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the inflation rate is 8% per year. 20 LRPC 18 16 14 12 10 INFLATION RATE (Percent) A SRPC 2 3 4 5 6 8 9 10 UNEMPLOYMENT RATE (Percent)Suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as . To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of % True or False: If people have rational expectations, the economy will experience a higher unemployment rate than predicted by the short-run Phillips curve. O True O FalseSuppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as . To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of % deflation True or False: If people have rational expectations, the econom disinflation nce a higher unemployment rate than predicted by the short-run Phillips curve. O True O False