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a.
To draw: A labeled graph for the long run and short run
a.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Calculation:
The long-run Phillip curve is showing the NAIRU and the equilibrium inflation rate E which is as follows:
Graph 1
In this graph, the short-run curve is downward sloping whereas the long-run curve is horizontal. E represents the equilibrium point whereas the long-run curve is the NAIRU (national
Phillip curve: Phillips curve depicts the relationship between the inflation rate and the unemployment rate. In short-run, the Phillips curve is downward sloping because the relationship is negative.
b.
To show: The effect on the graph if the increment is expected in the inflation rate.
b.
![Check Mark](/static/check-mark.png)
Explanation of Solution
Graph showing the effect if there is an increase in inflation rate which is as follows:
Therefore, if the inflation rate is increased, the Phillips curve will shift upward as the unemployment rate will reduce.
Phillip curve: Phillips curve depicts the relationship between the inflation rate and the unemployment rate. In short-run, the Phillips curve is downward sloping because the relationship is negative.
Chapter 6R Solutions
Krugman's Economics For The Ap® Course
- Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSONEngineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
- Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage LearningManagerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage LearningManagerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
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