EBK FOUNDATIONS OF ECONOMICS
EBK FOUNDATIONS OF ECONOMICS
8th Edition
ISBN: 8220103632225
Author: PARKIN
Publisher: PEARSON
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Chapter 31, Problem 7SPPA
To determine

To find:

The direction in which the unemployment rate would change, and the way short run and long run Philips curve would shift.

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Using what you know about the Phillips curve, determine whether the following quantities will increase, decrease, or remain the same. a. Unemployment in the short run after an increase in inflation: (Click to select) v b. Unemployment in the long run after an increase in inflation: (Click to select) v c. Inflation in the short run after a decrease in unemployment: (Click to select) d. Inflation in the long run after a decrease in unemployment: (Click to select) |(Click to select) decrease increase remain the same
The following graph shows an economy in long-run equilibrium at point A (grey star symbol). The vertical line is the long-run Phillips curve (LRPC). The downward-sloping curve labeled SRPC is the short-run Phillips curve passing through point A. INFLATION RATE (Percent) ཝ་ཤ་ཁ་ཀ་༥ 1 SRPC LRPC 0 0 1 2 3 UNEMPLOYMENT RATE (Percent) Which of the following is true along SRPC? The natural rate of unemployment is 2%. The actual unemployment rate is 1%. The expected inflation rate is 2%. SRPC2 с Suppose that the Fed suddenly and unexpectedly increases the money supply in an effort to reduce unemployment. As a result of this unanticipated action, actual inflation rises to 5%. On the previous graph, use the black point (plus symbol) to illustrate the short-run effects of this policy. Now, suppose that-after a period of 5% inflation-households and firms begin to expect that the inflation rate will continue to be 5%. On the previous graph, use the purple line (diamond symbol) to draw SRPC₂, the…
According to the Phillips curve, there is an inverse relationship between inflation and unemployment. It is possible for policymakers to “buy” lower unemployment by allowing higher inflation. Using a Phillips curve, illustrate and explain how nationwide rioting and looting will impact the economy and why this supply shock has implications for policymakers
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