What is Phillips curve? Draw the short-run Phillips curve and the long-run Phillips curve. Explain why they are different. b) Suppose the economy is in a long-run equilibrium. Suppose a wave of business pessimism reduces aggregate demand. Show the effect of this shock on your diagram from part (a). If the RBI undertakes expansionary/contractionary monetary policy, can it return the economy to its original inflation rate and original unemployment rate? (b) What is sacrifice ratio?
What is Phillips curve? Draw the short-run Phillips curve and the long-run Phillips curve. Explain why they are different. b) Suppose the economy is in a long-run equilibrium. Suppose a wave of business pessimism reduces aggregate demand. Show the effect of this shock on your diagram from part (a). If the RBI undertakes expansionary/contractionary monetary policy, can it return the economy to its original inflation rate and original unemployment rate? (b) What is sacrifice ratio?
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
Section17.1: The Phillips Curve
Problem 1QQ
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