12%

-12%

-6%

6%

production is by 3% higher than its potential output

production is by 3% lower than the potential output

the output gap is -1%

aggregate demand exceeds aggregate supply by 3%

the higher prices, the lower employment

policymakers may choose between lower money supply and higher inflation

there is a tradeoff between unemployment benefits and wages 

an increase in unemployment is associated with a lower rate of inflation

real output declines

potential output declines

real output increases

potential output increases

prices go up

Changes in money supply are fully offset by changes in money demand

Changes in aggregate demand which shift production above its potential level are associated with higher price level but not with the higher level of potential output

Changes in government purchased are fully covered with changes in taxes

Production is always on its potential level due to the accommodation policy used by the central bank