Answered: Alter the interactive graph in order to…

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 4.10P

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Question

Alter the interactive graph in order to witness how an upward shift of the MP curve affects the output gap and unexpected inflation. Using the following graph answer the following questions (more than one answer may be correct) 1. What events could have caused the shift in the top graph? a. The Fed increased the risk premium banks charge b.the Fed increased the federal funds rate c. government spending decreased d. an event caused financial institutions to increase the risk premium 2. Why didn't the Phillips curve shift in response to a shift in the MP curve? a. only shifts in aggregate demand shit the Phillips curve b. the IS-MP framework affects demand-pull inflation c. changes in the output gap affect the wedge between inflation and inflation expectations d. only shifts in aggregate supply shift the Phillips curve..

Real interest rate
Shift the IS curve to the left until the new output gap is -5%.
5%
4%
3%
2%
1%
0%
-10%
-5%
Unexpected inflation
(Inflation — Inflation expectations)
1%
-
0%
-1%
MP curve
IS curve
0%
5%
Output gap
Phillips curve
-2%
-10%
-5%
0%
5% powered by
desmos
Output gap

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