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Philip's Curve and AD-AS Model: Use assumptions below to set up an initial point denoted as the point A for a and b. For each of the following draw an AD/AS diagram and a corresponding Philip's curve assuming the following: 1) Natural unemployment is 5% 2) Unemployment is 4% 3) Actual GDP is 20,000 4) Full employment GDP is 10,000 a)show in both diagrams the effect of a surprise increase in inflation. b)Show in both diagrams the effect of Friedman and the Natural rate Theory(Hint:using monetary policy in the short run, but self-correction in the long run) c) Show in both diagrams the effects of a decrease in income tax on price level, output,unemployment and inflation.(Hint: Fiscal Policy) d)show in both diagrams the effect of a decrease in expected inflation.

Philip's Curve and AD-AS Model: Use assumptions below to set up an initial point denoted as the point A for a and b. For each of the following draw an AD/AS diagram and a corresponding Philip's curve assuming the following: 1) Natural unemployment is 5% 2) Unemployment is 4% 3) Actual GDP is 20,000 4) Full employment GDP is 10,000 a)show in both diagrams the effect of a surprise increase in inflation. b)Show in both diagrams the effect of Friedman and the Natural rate Theory(Hint:using monetary policy in the short run, but self-correction in the long run) c) Show in both diagrams the effects of a decrease in income tax on price level, output,unemployment and inflation.(Hint: Fiscal Policy) d)show in both diagrams the effect of a decrease in expected inflation.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Philip's Curve and AD-AS Model: Use assumptions below to set up an initial point denoted as the point A for a and b. For each of the following draw an AD/AS diagram and a corresponding Philip's curve assuming the following:
1) Natural unemployment is 5%
2) Unemployment is 4%
3) Actual GDP is 20,000
4) Full employment GDP is 10,000
a)show in both diagrams the effect of a surprise increase in inflation.
b)Show in both diagrams the effect of Friedman and the Natural rate Theory(Hint:using monetary policy in the short run, but self-correction in the long run)
c) Show in both diagrams the effects of a decrease in income tax on price level, output,unemployment and inflation.(Hint: Fiscal Policy)
d)show in both diagrams the effect of a decrease in expected inflation.
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