X-- One possible product

Y-- Other possible product

Arced line; shows Opportunity cost

Aggregate Demand/ Aggregate Supply

(AD/AS)

X-- GDP

Y-- Price Level

Equilibrium is Real Output

X-- Quantity of Money

Y-- Nominal Interest Rate

(Supply is vertical; Demand downward sloping)

X-- Quantity of Loanable Funds

Y-- Real Interest Rate

Foreign Exchange Market

(ex: Dollars and Yen)

X-- Quantity of Yen

Y-- Dollar Price of Yen

X-- Unemployment Rate %

Y-- Inflation Rate %

Inflation and Unemployment have an INVERSE relationship

(LR is vertical)

TRUE OR FALSE:

In the Phillips Curve there is a trade off between inflation and unemployment.

TRUE: Short run

FALSE: Long Run (there is no trade off!)

Resource Market

Buisness           Gov't           Housholds

Product Market 

Y=C+I+G+Xn

(Xn= open economy)