Consider the following figure. In this relatively unsuccessful economy, the Solow growth rate is 1% per year:
Question:
a. Calculate the value of X in this economy.
b. If spending growth were 15% in this economy, what would the inflation rate be in the long run, assuming the Solow growth rate stays fixed?
Transcribed Image Text:
Inflation rate AD (M +-15%) SRAS (Ta-696) ADAM + v-796) Solow Real GDP growth growth rate rate (1%)
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