Suppose the current macroeconomic equilibrium is represented by the following graph:

Use this graph as a starting point and draw a new AD line to depict the impact of an increase in interest rates. 

1.As the Fed continues to raise interest rates what will happen to AD (increase or decrease)?

2.What impact will that have on the unemployment rate and the inflation rate?
 

Transcribed Image Text:

Inflation Rate 7.7% 20 Trillion SRAS AD 2022 RGDP Inflation Rate 7.7% 20 Trillion SRAS AD 2022 RGDP