In the short run, an unexpected increase in the money supply results inunemployment rate.INFLATION RATE (Percent)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 increase in the moneysupply.10012UNEMPLOYMENT RATE (Percent)15In the long run, the increase in the money supply results in(relative to the economy's initial equilibrium).in the inflation rate and18in thein the inflation rate andin the unemployment rate 4. Monetary policy and the Phillips curveThe following graph plots the short-run Phillips curve for a hypothetical economy. The given point on the graph indicates the initial rates ofunemployment and inflation. Assume that the economy is currently in long-run equilibrium.Suppose the central bank of the hypothetical economy decides to increase the money supply.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)n00>SR Philips Curve612UNEMPLOYMENT RATE (Percent)15SR Phillips Curve

Phillips curve visualizes the relationship between the unemployment rate and the inflation rate. It…

In the short run, an unexpected increase in the money supply results in unemployment rate. INFLATION RATE (Percent) 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 increase in the money supply. 12 UNEMPLOYMENT RATE (Percent) 15 In the long run, the increase in the money supply results in (relative to the economy's initial equilibrium) in the inflation rate and 18 in the in the inflation rate and in the unemployment rate

In the short run, an unexpected increase in the money supply results in unemployment rate. INFLATION RATE (Percent) 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 increase in the money supply. 12 UNEMPLOYMENT RATE (Percent) 15 In the long run, the increase in the money supply results in (relative to the economy's initial equilibrium) in the inflation rate and 18 in the in the inflation rate and in the unemployment rate

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. O The size of the labor force O The level of technological knowledge The price level The inflation rate Suppose the economy produces real GDP of $40 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. 132 128 LRAS 124 120 116 Q112 + PRICE LEVEL
Suppose that the money supply increases by 20 percent. If there is no inflation, what does the quantity theory of money tell us must happen to real GDP? (Assume that the velocity of money is constant.) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a It must increase by more than 20% It must increase by less than 20% C It stays the same d. It must increase by 20%
9) Explain why inflation may tend to accelerate.
Gg.13.
“Members of Congress are interested in increasing the minimum wage from its current rate of $7.25 an hour to $15. What effect will this have on the unemployment rate for low-skilled workers? How is this likely to impact equilibrium output and the price level in the short run?"
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Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. Price Level LRAS Aggregate Supply Aggregate Demand Quantity of Output Now adjust the graph to show the new long-run equilibrium. Aggregate Demand € Aggregate Supply What causes the economy to move from its short-run equilibrium to its long-run equilibrium? The government increases spending to increase aggregate demand. Nominal wages, prices, and perceptions adjust downward to this new price level. O The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust upward to this new price level.
16. Keynes (1936) argued that, from a policy perspective, everything that can be achieved by a nominal wage cut can be more effectively achieved through an appropriate monetary policy. (a) Does this statement hold in the deﬁcient-demand Keynesian model for a negative shock to (i) aggregate demand and (ii) aggregate labor productivity? (b) Does this statement hold in the new Keynesian model for a negative shock to (i) aggregate demand and (ii) aggregate labor productivity?
As the Federal Reserve sharply raises rates in the face if substantial inflationary pressures, economists are trying to gauge the extent to which the U.S. labor market is slowing. First, how might you try to measure labor market slack? Second, across the business cycle, describe how the gap between whatever is true unemployment, and a notion of “full” employment generally relates to inflationary pressures. Finally, relate this gap to the economy’s overall ‘output gap’ (actual GDP vs. potential GDP).
According to Friedman, in which of the following situations is the economy in long-run equilibrium? a. The expected economic growth rate is 3 percent and the actual inflation rate is 3 percent. b. The average inflation rate over the past five years is 2 percent and the expected inflation rate is 2 percent. c. The expected inflation rate is 3 percent and the actual inflation rate is 3 percent. d. The expected economic growth rate is 2 percent and the expected inflation rate is 2 percent.
4. Monetary policy and the Phillips curve The following graph shows the current short-run Phillips curve for a hypothetical economy; the point on the graph shows the initial unemployment rate and inflation rate. Assume that the economy is currently in long-run equilibrium. Suppose the central bank of the hypothetical economy decides to increase the money supply. 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 N 1 0 0 SR Phillips Curve + 4 2 3 UNEMPLOYMENT RATE (Percent) 1 5 SR Phillips Curve In the short run, an unexpected increase in the money supply results in the unemployment rate. (?) in the inflation rate and in
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