Assume that the cconomy of Country X his an actual unemployment rate of 7%, a natural rate of unemployment of 5%, and an inflation rate of 3%.Using the numerical values given above, draw a correctly labeled graph of the short-run and long-run Phillips curves. Label the current short-run equilibrium as point B. Plot the numerical values above onthe graph.Assume that the government of Country X takes no policy action to reduce unemployment. In the long run, will each of the following shill to the right, shift to the left, or remain the same?(i) Short-run aggregate supply curve. Explain.(ii) Long-run Phillips curveIdentify a fiscal policy action that could be used to reduce the unemployment rate in the short run.Draw a correctly labeled graph of aggregate demand and short-run aggregate supply, and show the impact on the equilibrium price level and real gross domestic product (GDP) of the fiscal policy action identified

The Phillips curve is a graphical representation of the inverse relationship between unemployment…

Answered: Assume that the cconomy of Country X…

Principles of Economics, 7th Edition (MindTap Course List)

7th Edition

ISBN:9781285165875

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter35: The Short-Run Trade-off Between Inflation And Unemployment

Section: Chapter Questions

Problem 3QCMC

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Assume that the cconomy of Country X his an actual unemployment rate of 7%, a natural rate of unemployment of 5%, and an inflation rate of 3%.

Using the numerical values given above, draw a correctly labeled graph of the short-run and long-run Phillips curves. Label the current short-run equilibrium as point B. Plot the numerical values above on
the graph.
Assume that the government of Country X takes no policy action to reduce unemployment. In the long run, will each of the following shill to the right, shift to the left, or remain the same?

(i) Short-run aggregate supply curve. Explain.

(ii) Long-run Phillips curve

Identify a fiscal policy action that could be used to reduce the unemployment rate in the short run.
Draw a correctly labeled graph of aggregate demand and short-run aggregate supply, and show the impact on the equilibrium price level and real gross domestic product (GDP) of the fiscal policy action identified

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