8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Real GDP (Y) The graph above shows the goods market condition in a country. The Fed is NOT following an inflation targeting policy. Currently, the inflation rate is n = 5.00 percent and the potential GDP equals Yp = 100,00O. Marginal propensity to consume is MPC = 0.75. Okun's alpha equals 2. Consider a long-lived demand shock. Suppose that business firms reduce their investment spending by 750 units. In that case: Inflation rate in the long run = percent. Real GDP in the long run = Cyclical unemployment in the long run = percent. 000'901 000'SoT 000'voT 000'EOT 000ʻzot 000'TOT 000'00t 000'66 000'8e 000'26 000'96 000's6 000'v6 000'E6 000'z6 000't6 000'06 Inflation Rate (N)

8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Real GDP (Y) The graph above shows the goods market condition in a country. The Fed is NOT following an inflation targeting policy. Currently, the inflation rate is n = 5.00 percent and the potential GDP equals Yp = 100,00O. Marginal propensity to consume is MPC = 0.75. Okun's alpha equals 2. Consider a long-lived demand shock. Suppose that business firms reduce their investment spending by 750 units. In that case: Inflation rate in the long run = percent. Real GDP in the long run = Cyclical unemployment in the long run = percent. 000'901 000'SoT 000'voT 000'EOT 000ʻzot 000'TOT 000'00t 000'66 000'8e 000'26 000'96 000's6 000'v6 000'E6 000'z6 000't6 000'06 Inflation Rate (N)

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter14: Money And The Economy

Section: Chapter Questions

Problem 8QP

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