Here are some news reports covering events of the past 35 years. In each case, i

Question

Here are some news reports covering events of the past 35 years. In each case, identify the phase (Phillips, stagflation, or recovery) the economy is in, and suggest what change in aggregate demand or aggregate supply might have caused it.

A. “President Nixon expressed satisfaction with last year’s economic performance. He said that with

inflation and unemployment heading down, the nation ‘is on the right course.’”

B. “The nation’s inflation rate rose to a record high last month, the government reported yesterday. The consumer price index jumped 0.3% in January. Coupled with the announcement earlier this month that unemployment had risen by 0.5 percentage points, the reports suggested that the first month of President Nixon’s second term had gotten off

to a rocky start.”

C. “President Carter expressed concern about reports of rising inflation but insisted the economy is on the

right course. He pointed to recent reductions in unemployment as evidence that his economic policies

are working.”

Explanation / Answer

the co

the economic policies are working to minimise the inflation and unemployment

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