Question
Hello my Macro Resit exam is tomorrow, can you please help me solve these problems, Im not sure which graphs to draw. How can I
Hello my Macro Resit exam is tomorrow, can you please help me solve these problems, Im not sure which graphs to draw. How can I answer these questions correctly.
Problems:
1. Assume that employers and workers both forecast that prices will increase by 2 per cent next year. Using a SRAS diagram show what would happen to output if inflation turned out to be (a) 3 per cent (b) 1 per cent.
2. Starting from a position of long-run equilibrium, the central bank decides to raise its target inflation rate. Use the AD-AS models to explain: a. how the bank can achieve the new target inflation rate b. the adjustment of inflation and output in the short and long run.
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