2. The Phillips curve in the short run and long run The following graph plots aggregate demand (AD2027) and aggregate supply (AS) for the imaginary country of Patagonia in the year 2027. Suppose the natural level of output in this economy is $6 trillion. On the following graph, use the green line (triangle symbol) to plot the long-run aggregate supply (LRAS) curve for this economy. 108 A 107 LRAS AS 106 B 105 Outcome C A PRICE LEVEL 104 2027 103 ADB 102 AD A 101 100 2 4 6 8 10 12 14 16 OUTPUT (Trillions of dollars)Economists forecast that if the government takes no action and the economy continues to grow at the current rate, aggregate demand in 2025 will be given by the curve labeled ADA, resulting in the outcome given bv point A. If, however, the government pursues an expansionary.f policy, aggregate demand in 2025 will be given by the curve labeled ADE, resulting in the outcome given by point B. The following table presents projections for the unemployment rates that would occur at point A and point B. Consider the potential rate of inflation between 202? and 2028. depending on whether the economv moves from the initial price level of 102 to the price level at outcome A or the price level at outcome B. Complete the table by entering the inflation rate at each potential outcome point. Note: Calculate the inflation rate to two decimal points of precision. Unemployment Rate Inflation Rate A 7% /% B 5% Based on your answers to the preceding parts, use the black line (plus symbol) to draw the short-run Phillips curve (SRPC) for this economy in 2028. (Note: You will not be graded on any changes you make to this graph.)? CO + SRPC A LRPC INFLATION RATE (Percent) 3 2 3 5 6 8 UNEMPLOYMENT RATE (Percent) The short-run Phillips curve is line: O At the natural level of output Representing the tradeoff between unemployment and inflation O At the natural rate of unemploymentNow consider the long-run effects of this policy. Suppose, in particular, that following implementation of the policy, the aggregate demand curve remains at ADg. The long-run equilibrium that would follow such a policy is designated outcome C. Going back to the first graph, place the grey point (star symbol) at outcome C. Because output at point C is the natural level of output, the unemployment rate associated with outcome C is the natural rate of unemployment. Finally, use the green line (triangle symbol) to draw the long-run Phillips curve (LRPC) on the second graph. This line is line: O Representing the tradeoff between unemployment and inflation O At the natural rate of unemployment O At the natural level of output