Assignment:
Consider the following table for the first two years of Great Depression. The values for real GDP are given in 2000 dollars.
Year
|
Actual Real GDP
|
Potential Real GDP
|
Price level
|
1929
|
865.2 billion
|
865.2 billion
|
12
|
1930
|
790.7 billion
|
895.7 billion
|
11.5
|
a. What is the inflation rate?
b. Draw a graph with AD, SRAS, and LRAS for both years showing what happened in these years. You should indicate the macroeconomic equilibrium in each year, and the directions in which the curves have shift.
c. What happened to unemployment? We know from the history unemployment went up. Does your table and graph show it? How?