Macroeconomics
4th Edition
ISBN: 9780393602487
Author: Jones, Charles I.
Publisher: W. W. Norton & Company
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Question
Chapter 12, Problem 10E
(a)
To determine
The impact of the consumption boom in the economy.
(b)
To determine
Interference of the Fed.
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Suppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADAADA to ADBADB. This would cause a (move along , shift of) the short-run Phillips curve, resulting in (increase, decrease) in the inflation rate and (increase, decrease) in the unemployment rate.
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Consider an economy on its long-run path. The inflation is 10%. Suppose the slope of the Phillips
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During an election term, the government increases its spending temporarily. Show the effect of this shock on the economy using the IS-MP-PC model. Explain how and why you would change the interest rate in response to this shock. Make sure to draw the IS-MP diagram and Phillips curve.
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