A nation's economy is in short run equilibrium. The actual unemployment rate is lower than the natural rate of unemployment. A. Show each of the following using a correctly labeled graph of the long run aggregate supply curve, short run aggregate supply curve, and aggregate demand curve: i. Current price level, labeled PL1, and current output level, labeled Y1 ii. The full employment output level, labeled Yf. B. Use a correctly labeled money market graph to show how the country's central bank action can move the economy toward its long run equilibrium. Indicate how this affects the equilibrium nominal interest rate in the short run.

A nation's economy is in short run equilibrium. The actual unemployment rate is lower than the natural rate of unemployment. A. Show each of the following using a correctly labeled graph of the long run aggregate supply curve, short run aggregate supply curve, and aggregate demand curve: i. Current price level, labeled PL1, and current output level, labeled Y1 ii. The full employment output level, labeled Yf. B. Use a correctly labeled money market graph to show how the country's central bank action can move the economy toward its long run equilibrium. Indicate how this affects the equilibrium nominal interest rate in the short run.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section: Chapter Questions

Problem 5PA

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