Table 1 describes five possible outcomes in a country for 2017, depending on the level of aggregate demand in that year. Potential GDP is $10 trillion, and the natural unemployment rate is 5 percent.

1. Calculate the inflation rate for each possible outcome.

2. Use Okun’s Law to find real GDP at each unemployment rate in Table 1.

3. What are the expected price level and the expected inflation rate in 2017?

4. Plot the short-run Phillips curve for 2017. Mark the points A, B, C, D, and E that correspond to the data in Table 1 and that you have calculated.

5. Plot the aggregate supply curve for 2017. Mark the points A, B, C, D, and E that correspond to the data in Table 1.

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TABLE 1 A B C D E Price level (2016 = 100) 102.5 105.0 106.0 107.5 110.0 Unemployment rate (percentage) 9 6 543