Monetary policy and the Philips curve On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the short-run effects of this policy.Hint: You may assume that the central bank's move was unanticipated.INFLATION RATE (Percent)650026SR Phillips Curve8UNEMPLOYMENT RATE (Percent)1012In the short run, an unexpected decrease in the money supply results inunemployment rate.SR Phillips Curve-OMacBook Air(?in the inflation rate andin the y ToolsTipsipsJ2ºOn the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the decrease in the moneysupply.30F2INFLATION RATE (Percent)53210#03280F34UNEMPLOYMENT RATE (Percent)In the long run, the decrease in the money supply results in(relative to the economy's initial equilibrium).$46QF4%85910F5A612-OF6MacBook Air&7(?)in the inflation rate andKF7* CO8DIIF8(9in the unemployment rateF9)0F10F11+ 11A+A-ZMF12werMirroreen Shot07...3.06 PMCemureen Shot07...3.18 PMdelete

The Phillips curve graphically illustrates the economic relationship between the rate of…

Answered: In the short run, an unexpected…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter14: Macroeconomic Policy: Tradeoffs, Expectations, Credibility, And Sources Of Business Cycles

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Problem 3E

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Monetary policy and the Philips curve

On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the short-run effects of this policy.
Hint: You may assume that the central bank's move was unanticipated.
INFLATION RATE (Percent)
6
5
0
0
2
6
SR Phillips Curve
8
UNEMPLOYMENT RATE (Percent)
10
12
In the short run, an unexpected decrease in the money supply results in
unemployment rate.
SR Phillips Curve
-O
MacBook Air
(?
in the inflation rate and
in the

y Tools
Tips
ips
J
2º
On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the decrease in the money
supply.
30
F2
INFLATION RATE (Percent)
5
3
2
1
0
#
0
3
2
80
F3
4
UNEMPLOYMENT RATE (Percent)
In the long run, the decrease in the money supply results in
(relative to the economy's initial equilibrium).
$
4
6
Q
F4
%
8
5
9
10
F5
A
6
12
-O
F6
MacBook Air
&
7
(?)
in the inflation rate and
K
F7
* CO
8
DII
F8
(
9
in the unemployment rate
F9
)
0
F10
F11
+ 11
A+
A-Z
M
F12
werMirror
een Shot
07...3.06 PM
Cemu
reen Shot
07...3.18 PM
delete

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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