The following graph depicts the short-run and long-run Phillips curves (SRPC and LRPC) for a hypothetical economy in long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the current inflation rate is 8% per year.
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- The following graph depicts the short-run and long-run Phillips curves (SRPC and LRPC) for a hypothetical economy in long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the current inflation rate is 8% per year.The following graph plots the long-run Phillips curve (LRPC) and short-run Phillips curve (SRPC1SRPC1) for an economy currently experiencing long-run equilibrium at point A (grey star symbol). Which of the following is true along SRPC1SRPC1? -The actual unemployment rate is 6%. -The expected inflation rate is 5%. -The actual inflation rate is 5%. -The natural rate of unemployment is 3%. Suppose that the central bank for this economy suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated policy action, actual inflation falls to 3%. On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy. Suppose that now, after a period of 3% inflation, households and firms begin to expect that the inflation rate will persist at the level of 3%. On the previous graph, use the purple line (diamond symbol) to draw SRPC2SRPC2, the short-run Phillips curve that is…The following graph plots the long-run Phillips curve (LRPC) and short-run Phillips curve (SRPC1SRPC1) for an economy currently experiencing long-run equilibrium at point A (grey star symbol). Which of the following is true along SRPC1SRPC1? -The actual unemployment rate is 6%. -The expected inflation rate is 5%. -The actual inflation rate is 5%. -The natural rate of unemployment is 3%. Suppose that the central bank for this economy suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated policy action, actual inflation falls to 3%. On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy. Suppose that now, after a period of 3% inflation, households and firms begin to expect that the inflation rate will persist at the level of 3%. On the previous graph, use the purple line (diamond symbol) to draw SRPC2SRPC2, the short-run…
- The following graph plots the short-run and long-run Phillips curves (SRPC and LRPC, respectively) for an economy currently experiencing long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the inflation rate is 8% per year. Suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as (deflation/disinflation) . To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of ____% True or False: If people have rational expectations, the economy may not have to endure an unemployment rate as high as predicted by the short-run Phillips curve. -True -FalseAssume the economy of Country X is operating above its full-employment output level. Using a correctly labeled graph of aggregate demand, short-run aggregate supply, and long-run aggregate supply, show the short-run equilibrium, labeling the equilibrium price level as PLe and the equilibrium output as Ye. Draw a single correctly labeled graph and show both a short-run and a long-run Phillips curve. Identify a point that could represent the short-run equilibrium in part (a) and label it as Z. Assume that the central bank of Country X wants the economy to be in full-employment equilibrium. What open-market operation should the central bank initiate? Given your answer in part (c), what will be the effect of the central bank’s open-market operation on each of the following in the short run? The nominal interest rate Employment. Explain. Assume that the real interest rate increases in Country X. Will the international value of Country X’s currency increase, decrease, or…For each of the following scenarios, illustrate the effects of the development on both the short-run and long-run Phillips curves (SRPC and LRPC, respectively). 1. There is a rise in the price of imported oil. 2. There is a fall in government spending.
- For each of the following scenarios, illustrate the effects of the development on both the short-run and long-run Phillips curves (SRPC and LRPC, respectively). (Please use the image attached) 1. There is a rise in the price of imported oil. 2. There is a fall in government spending.Assuming the long-run Phillips curve is vertical, a consistent increase in money supply over a period of years will _________________ the unemployment rate and will _________________ the inflation rate? a) decrease; increase b) increase; decrease c) increase; have no effect on d) decrease; decrease e) have no effect on; increaseAssume that the United States economy is currently in a recession in a short-run equilibrium. Draw a correctly labeled graph of the short-run and long-run Phillips curves. Use the letter X to label a point to represent the current state of the economy in recession.
- Does the short-run Phillips curve have a positive or negative slope? Explain how this slope is derived.Consider the Phillips curves depicted in the graph above. The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds. If expectations of inflation are not altered by the Fed's announcement, the rate of unemployment will be ________ in the short run. a)less than 5.5 percent b)5.5 percent c)between 5.5 and 7.5 percent d)7.5 percentIf the actual unemployment rate falls below the natural unemployment rate, how does the actual inflation rate change? The actual inflation rate ________. A. doesn't change, but the short-run Phillips curve shifts leftward B. rises up along the short-run Phillips curve C. doesn't change, but the expected inflation rate rises D. rises and the natural unemployment rate falls
