Assume that the economy of Country X has 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 shift to the right, shift to the left, or remain the same? Short-run aggregate supply curve. ExplainLong-run Phillips curve. Explain

Answer - Given in the question- Assume that the economy of Country X has an actual unemployment rate…

Answered: Assume that the economy of Country X…

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter27: The Philips Curve And Expetactions Theory

Section: Chapter Questions

Problem 8SQ

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Assume that the economy of Country X has an actual unemployment rate of 7%, a natural rate of unemployment of 5%, and an inflation rate of 3%.
1. 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.
2. Assume that the government of Country X takes no policy action to reduce unemployment. In the long run, will each of the following shift to the right, shift to the left, or remain the same?
  1. Short-run aggregate supply curve. Explain
  2. Long-run Phillips curve. Explain

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