Supply and Demand and Aggregate Demand Curve Essay

881 Words Jun 17th, 2014 4 Pages
Minghao Feng
ECO 102 B
Assignment #6
03/25/2014

SECTION ONE: 1 point

Here you will find questions related to chapter 27. a Assume that employers and workers agree that real wages should rise by 2% next year. If inflation is expected to be 2% next year, what will workers ask for in regard to wages next year?

From the question we know that employers and workers want to raise real wages by 2%. But inflation will be 2% in next year. Actually, the employers and workers do not changer their real wages, so they shod ask for the real wages rise to 4%.

b If inflation is expected to be 4% next year, rather than 2%, what will workers ask for?

They should ask the real wages rise to 6%.

c Use your answers from parts
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Short-run macroeconomic equilibrium occurs at the intersection of the aggregate demand curve and the short-run aggregate supply curve. h) Does Japan have an inflationary gap or a recessionary gap and what is its magnitude?

Equilibrium real GDP is less than potential GDP, so Japan has a recessionary gap. The recessionary gap equals the difference between potential GDP and real GDP, which is ¥100 trillion.
SECTION THREE: 2 points
Regarding the AS/AD model and assuming full

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