Suppose that everyone anticipated that the GDP deflator would be 100 in the current period.
Here are the AgD and AgS schedules for this period. (AgD and AgS are in trillions of dollars.)
GDP Deflator AgD100 AgS100
80 18 7
100 16 11
120 14 14
140 12 17
160 10 20
a. What does “anticipated” mean in this context?
b. What is the actual GDP deflator in the current period? Explain your answer.
c. What is GDP in the current period? Explain your answer.
d. Will this level of GDP also apply in the long run? Explain your answer.
e. Is the actual rate of unemployment in the current period less than, equal to, or greater than the
natural rate? Explain your answer.
Note: GDP means real GDP.
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