ap macro

1. The economy is currently operating at a point that is less than the full employment level of output. A. Draw a correctly labeled graph of aggregate demand, short-run aggregate supply, long-run aggregate supply, and show each of the following. I. Initial Output labeled as Y1, and Initial Price Level as PL1 II. Full-employment output, labeled as Yf B. Because of lower interest rates, Investment spending increases. I. Using the graph from part A, show the short run impact of this change on Price Level and GDP. Il. Label the potential change Y2 and PL2, respectively. 2. Based solely on the change in real output on your graph, what will happen to the rate of unemployment in the short run? Will it increase, decrease or stay the same? Explain 3. Assume the economy is currently operating with an unemployment rate of 6%, a natural rate of unemployment (NRU) of 5% and an inflation rate of 3%. A. Draw a Phillips curve graph labeling all axes, the long-run Phillips curve, and the short-run Phillips curve. B. Using the numerical values given above, mark a point on the graph depicting the current equilibrium, and label the point "A"