. Assume that the South African economy is at equilibrium where output is equal to the natural level of output. Now suppose there is an increase in unemployment benefits in the country. Use the IC-LM-PC model to graphically illustrate the effects of an increase in unemployment benefits on the labor market (the WS and PS curves), the goods and money markets (the IS and LM curves) and on the Phillips curve. In your answer illustrate the differences in what happens to output, inflation and real interest rate between the short-run (SR) and medium-run (MR).

. Assume that the South African economy is at equilibrium where output is equal to the natural level of output. Now suppose there is an increase in unemployment benefits in the country. Use the IC-LM-PC model to graphically illustrate the effects of an increase in unemployment benefits on the labor market (the WS and PS curves), the goods and money markets (the IS and LM curves) and on the Phillips curve. In your answer illustrate the differences in what happens to output, inflation and real interest rate between the short-run (SR) and medium-run (MR).

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: The Short-run Trade-off Between Inflation And Unemployment

Section17.3: Shifts In The Phillips Curve: The Role Of Supply Shocks

Problem 3QQ

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