(Module 34) Ihe economy of Maxistan is in long-run equilibrium. The non-accelerating inflation rate of unemployment is 6% and inflation expectations are currently 3%. a. Draw a correctly labeled graph that shows the short-run and long-run Phillips curves, the current rate of inflation and the unemployment rate. b. Suppose the government of Maxistan decreases taxes. In the graph from part (a), identify a point "T" that might reflect the new short-run equilibrium in the economy. c. Describe how the economy in Maxistan would adiust in the long run to the tax decrease from part (b), Describe how this would affect the graph.

(Module 34) Ihe economy of Maxistan is in long-run equilibrium. The non-accelerating inflation rate of unemployment is 6% and inflation expectations are currently 3%. a. Draw a correctly labeled graph that shows the short-run and long-run Phillips curves, the current rate of inflation and the unemployment rate. b. Suppose the government of Maxistan decreases taxes. In the graph from part (a), identify a point "T" that might reflect the new short-run equilibrium in the economy. c. Describe how the economy in Maxistan would adiust in the long run to the tax decrease from part (b), Describe how this would affect the graph.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter16: Macro Policy Debate: Active Or Passive?

Section: Chapter Questions

Problem 1.2P

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