USE GRAPH, IF APPLICABLE, AS MUCH AS YOU CAN.

QUESTION 3:

a) Consider the basic representations of the Multiplier, WS-PS and PC models as analysed this term. All possible outcomes for this question are listed below:

Outcomes:

1: The AD curve shifts upwards.

2: The AD curve shifts downwards.

3: There is an increase in real GDP.

4: There is a decrease in real GDP.

5: There is an increase in unemployment.

6: There is a decrease in unemployment.

7: The Phillips curve shifts upwards over time.

8: The Phillips curve shifts downwards over time.

9: The PS curve shifts upwards.

10: The PS curve shifts downwards.

11: The price level increasesat a constant rate (??=0) over time. 12: The price level increasesat an increasing rate (??>0) over time. 13: The price level falls (??

For each market change specified below ((i) and (ii)), illustrate how these will affect the economy over time. Then, redraw (or copy) the table that follows into your answer script, andmark a 'Y' for 'Yes' or an 'N' for 'No'next to each specified change that explains the abovementioned outcomes. Fill in all the cells with either a Y or an N. [14]

conditions: a) A drop in interest rates by the Central Bank leads to an increase in spending across the economy (initial are b) There is an increase in the world price of oil Le. a negative supply shock, while employment levels remain the same initial ire =1%