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Chapter 12

Chapter 12 Inflation and Output

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University of Guelph
ECON 1100
Eveline Adomait

Chapter 12: Inflation and Output Saturday, March 16, 201312:56 PM 12.1 Inflation, Spending, and Output: Overview and the Aggregate Demand (ADI) Curve Definitions Aggregate Demand (ADI) Curve- shows the relationship between short-run equilibrium output Y and the rate of inflation Monetary Policy Rule- describes how the action a central bank takes in response to changes in the state of the economy depends on the state of the economy 12.2 Inflation and Aggregate Supply: Understanding the IA and LRAS Curves Definitions Inflation Adjustment (IA) Curve- a horizontal line showing the current rate of inflation, as determined by past expectations and price decisions Long Run Aggregate Supply (LRAS) Curve- a relationship between potential output and the inflation rate; a vertical curve indicating that potential output is independent of the inflation rate 12.3 Putting it All Together: Equilibrium in the ADI-IA Model Defi
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