INFLATION RATE (Percent) The following graph plots the short-run Phillips curve for a hypothetical economy. The given point on the graph indicates the initial rates of unemployment 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. 5 1 2 3 4 SR Phillips Curve UNEMPLOYMENT RATE (Percent) 5 6 SR Phillips Curve ? In the short run, an unexpected increase in the money supply results in unemployment rate. in the inflation rate and in the 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. 0 0 1 2 3 4 UNEMPLOYMENT RATE (Percent) 5 6 In the long run, the increase in the money supply results in (relative to the economy's initial equilibrium). in the inflation rate and in the unemployment rate
INFLATION RATE (Percent) The following graph plots the short-run Phillips curve for a hypothetical economy. The given point on the graph indicates the initial rates of unemployment 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. 5 1 2 3 4 SR Phillips Curve UNEMPLOYMENT RATE (Percent) 5 6 SR Phillips Curve ? In the short run, an unexpected increase in the money supply results in unemployment rate. in the inflation rate and in the 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. 0 0 1 2 3 4 UNEMPLOYMENT RATE (Percent) 5 6 In the long run, the increase in the money supply results in (relative to the economy's initial equilibrium). in the inflation rate and in the unemployment rate
Chapter7: Inflation
Section: Chapter Questions
Problem 13SQ
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Transcribed Image Text:INFLATION RATE (Percent)
The following graph plots the short-run Phillips curve for a hypothetical economy. The given point on the graph indicates the initial rates of
unemployment 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.
5
1
2
3
4
SR Phillips Curve
UNEMPLOYMENT RATE (Percent)
5
6
SR Phillips Curve
?
In the short run, an unexpected increase in the money supply results in
unemployment rate.
in the inflation rate and
in the
Transcribed Image Text: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.
0
0
1
2
3
4
UNEMPLOYMENT RATE (Percent)
5
6
In the long run, the increase in the money supply results in
(relative to the economy's initial equilibrium).
in the inflation rate and
in the unemployment rate
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