Use the graph to answer the following questions.

a. If the government takes no policy actions, what will be the values of real GDP and the price level in 2019?
b. What actions can the government take to bring real GDP to its potential level in 2019?
c. If the government takes no policy actions, what will the inflation rate be in 2019? If the government uses fiscal policy to keep real GDP at its potential level, what will the inflation rate be in 2019?

Transcribed Image Text:

LRAS2019 LRAS2018 Price level SRAS2018 (GDP deflator, 2000 = 100) SRAS2019 119 117 AD2019 (with pollcy) 114 AD2019. (without pollcy) AD2018 Real GDP (trillions of 2009 dollars) 18.2 18.3 $17.9