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Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
BuyFind

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

Solutions

Chapter
Section
Chapter 22, Problem 2PA
Textbook Problem
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Illustrate the effects of the following developments on both the short-run and long-run Phillips curves. Give the economic reasoning underlying your answers.

a. a rise in the natural rate of unemployment

b. a decline in the price of imported oil

c. a rise in government spending

d. a decline in expected inflation

Expert Solution

Sub part (a):

To determine
Changes in short run and long run Phillips curve.

Explanation of Solution

The effect of a rise in the natural rate of unemployment on Phillips curve is shown in the following figure.

Figure 1 shows the shift in the Philips curve.

In Figure 1, the vertical axis measures inflation rate and the horizontal axis measure unemployment rate. The downward sloping curve shows the shift in the short run Phillips curve. The vertical line parallel to vertical axis is the long run Phillips curve...

Expert Solution

Sub part (b):

To determine
Changes in short run and long run Phillips curve.

Expert Solution

Sub part (c):

To determine
Changes in short run and long run Phillips curve.

Expert Solution

Sub part (d):

To determine
Changes in short run and long run Phillips curve.

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