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32. Use the following graph to answer these questions. Price level 117.0 114.2 AD2017 (with policy) 110.0 AD2017 (without policy) AD2016 $1400 1600 1650 Real

32. Use the following graph to answer these questions. Price level 117.0 114.2 AD2017 (with policy) 110.0 AD2017 (without policy) AD2016 $1400 1600 1650 Real GDP (billions of dollars) a. If the government does not take any policy actions, what will be the values of real GDP and the price level in 2017? 2 marks b. What actions can the government take to bring real GDP to its potential level in 2017? 2 marks C. If the government takes no policy actions, what will be the inflation rate in 2017? If the government uses fiscal policy to keep real GDP at its potential level, what will be the inflation rate in 2017? 3+3 marks

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