Documented Problem Solving: Adjustment of Output and Inflation to a Demand Shock
and is replicated here as part of the SERC Pedagogic Service.
In this macroeconomics problem, students check to see whether they understand the role nominal aggregate demand and inflation expectations play in determining the economy's output level and inflation rate.
- understand the relationship between nominal GDP growth, real GDP growth, and the inflation rate;
- describe how nominal aggregate demand determines the location of an economy on a short-run Phillips Curve;
- recognize that changes in inflation expectation change the path an economy follows as it adjusts to a demand shock.
Context for Use
Description and Teaching Materials
Documenting a Solution to a Macroeconomics Problem (Microsoft Word 2007 (.docx) 18kB Apr6 10)