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Answer the questions based on the following information. The Wolfville economy is currently experiencing an inflationary gap. Draw a correctly labeled aggregate demand-aggregate supply graph
Answer the questions based on the following information.
The Wolfville economy is currently experiencing an inflationary gap.
- Draw a correctly labeled aggregate demand-aggregate supply graph that illustrates Wolfville's current economy. (2 points)
- The Wolfville government is exploring policy options to reduce the inflation. State TWO specific policies they could consider. (2 points)
- The Wolfville central bank is also exploring policy options. State ONE specific policy they could enact. (1 point)
- The congress of Wolfville is in gridlock and cannot decide upon a policy. Therefore, the central bank decides to use the policy you suggested in Question 3. Using a correctly labeled Money Market Graph, show the impact of your central bank policy. Determine if interest rates have increased or decreased. (3 points)
- On your graph in Question #1, show how the economy has been impacted by the central bank's policy decision.(1 point)
- On a correctly labeled Phillips Curve graph, show the results of the central bank's policy that you enacted in Question #4.(2 points)
- Analyze your graph from Question #6. Determine what happened to the following: (2 points)
- Inflation Rate
- Unemployment Rate
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