Use the graph below to explain the inflationary expenditure gap.
What will be an ideal response?
Based on the graph we see there is an inflationary expenditure gap of $25 billion. Real GDP will be $500, the full employment level, but there will be inflation. This will result in demand-pull inflation.
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Comparing the AS-AD model and the Phillips curve, we see that
A) they both are graphed as a relationship between the rate of inflation and the unemployment rate. B) the AS-AD model uses the price level and the Phillips curve uses the rate of inflation. C) the AS-AD model is graphed as a relationship between the inflation rate and the rate of real GDP. D) the AS-AD model uses the price level and the Phillips curve uses real GDP. E) the Phillips curve is graphed as a relationship between the price level and the unemployment rate.
If the demand for a good falls when income falls, then the good is called a(n)
a. normal good. b. regular good. c. luxury good. d. inferior good.