Click on the icon to read the news clip, then complete the following steps. Price level (GDP deflator, 2009 = 100) The graph shows the economy's long-run aggregate supply, short-run aggregate supply, and aggregate demand curves. LAS 130- Draw an AD curve that shows the effect of an increase in the expected inflation rate. Label it. Draw an SAS curve that shows the effect of an increase in the money wage rate when the economy experiences 120- expected inflation and returns to an full-employment equilibrium. Label it. SAS Draw a point at the new long-run equilibrium. 110-......... i News clip - X 100- Tight Money Won't Slay Food, Energy Inflation AD It's important to differentiate between a general increase in prices-a situation in 90+ 13.0 which aggregate demand exceeds their aggregate supply-and a relative price 11.5 12.0 12.5 13.0 13.5 14.0 14.5 15.0 shock. For example, a specific shock to energy prices can become generalized if Real GDP (trillions of 2009 dollars) producers are able to pass on the higher costs. So far, global competition has made that difficult for companies, while higher input costs have largely been >>> Draw only the objects specified in the question. neutralized by rising labour productivity. Since 2003, core inflation has averaged less than 2 percent a year in the 30 major economies. History also suggests gambling that slowing growth will shackle core inflation is a winning wager. The risk is that if U.S. consumers don't believe price increases will slow, growing inflation expectations may become self-fulfilling. Source: Bloomberg, May 9, 2008 Print Done X Delete Clear ? Click the graph, choose a tool in the palette and follow the instructions to create your graph. ? All parts showing Clear All Check