The pace of German economic growth has weakened “markedly,” but the reason is the weaker global prospects. Although German policymakers worry about the country’s exposure to a fall in demand for its export goods, evidence is growing that the recovery is broadening with real wage rates rising and unemployment falling, which will lead into stronger consumer spending.
a. How does “exposure to a fall in demand for its export goods” influence Germany’s aggregate demand, aggregate supply, unemployment and inflation?
b. Use the AS-AD model to illustrate your answer to part (a).
c. Use the Phillips curve model to illustrate your answer to part (a).
d. What do you think the news clip means by “the recovery is broadening with real wage rates rising and unemployment falling, which will lead into stronger consumer spending”?
e. Use the AS-AD model to illustrate your answer to part (d).
f. Use the Phillips curve model to illustrate your answer to part (d).