Consider a baseline long run steady state equilibrium where output is 20 trillion dollars, and the price level is 100. Note: price expectation is the same as the price level at the long run steady state equilibrium & unemployment is 5% or lower a) In the top panel, draw the baseline long run steady state equilibrium (call it A). Suppose this equilibrium existed in September of 2021. Now draw a bottom panel with Inflation on the vertical and unemployment on the horizontal axis & show a point that represents 2% inflation and 5% unemployment. Call this point E. b) Suppose the Federal Reserve undertakes expansionary monetary policies after September of 2021. In the top
Q: Consider a baseline long run steady state equilibrium where output is 20 trillion dollars, and the
a) In the top panel, draw the baseline long run steady state equilibrium (call it A). Suppose this equilibrium existed in September of 2021. Now draw a bottom panel with Inflation on the vertical and unemployment on the horizontal axis & show a point that represents 2% inflation and 5% unemployment. Call this point E.
b) Suppose the Federal Reserve undertakes expansionary
c) Now join points E and F to generate the
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 5 images