Draw the following four graphs with an economy experiencing an inflationary gap: money market, investment demand, aggregate demand, and supply (with the LRAS), and the Phillips curve. Show what happens in the short run on all three graphs when the central bank decreases the money supply.

Draw the following four graphs with an economy experiencing an inflationary gap: money market, investment demand, aggregate demand, and supply (with the LRAS), and the Phillips curve. Show what happens in the short run on all three graphs when the central bank decreases the money supply.

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

Section: Chapter Questions

Problem 5CQQ

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Step 1: Define inflationary gap:-

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