Answer Economic Questions Using Graph

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a.          If the above graph is a depiction of the state of the economy as it is now, what would have to             happen for there to be stagflation?

 

 

b.            What is used to measure the price level in the AS-AD model above?

 

 

c.            What does the Potential GDP curve represent and what is its relationship to the price level?

 

 

 

 

 

 

 

 

d.            Explain why it is possible for production to be greater than Potential GDP.

 

 

 

 

 

 

e.            Give three reasons that the AD curve slopes downward.

 

 

 

 

f.            Give three theories as to why the Short Run Aggregate Supply curve slopes upward.

 

 

 

 

g.            Give one reason for each curve, that would cause the curve to shift.