Chapter 24: Q 29. (page 602)
What is stagflation?
Stagflation occurs when the SRAS curve shifts leftwards.
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Suppose, after five years of sluggish growth, the European Union's economy picks up speed. What would be the likely impact on the U.S. trade balance, GDP, and employment?
Suppose the U.S. Congress passes significant immigration reform that makes it more difficult for foreigners to come to the United States to work. Use the AD/AS model to explain how this would affect the equilibrium level of GDP and the price level.
How is the natural rate of unemployment illustrated in an AD/AS model?
A policymaker claims that tax cuts led the economy out of a recession. Can we use the AD/AS diagram to show this?
Suppose we extend the circular flow model to add imports and exports. Copy the circular flow diagram onto a
sheet of paper and then add a foreign country as a third agent. Draw a rough sketch of the flows of imports, exports,
and the payments for each on your diagram.
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