Price level (GDP deflator, 2009=100) Fed Raises Rates As Job Gains, Firming Inflation Stoke Confidence The U.S. Federal Reserve raised interest rates on Wednesday. The rate rise was the second in three months. This second rise comes in an economy that is growing faster and creating jobs at a more rapid pace. These gains are accompanied by a rising inflation rate. 140- 130- Source: Reuters, March 15, 2017 Describe the process by which the Fed's action reported in the news clip flows through the economy. 120- ... 110- LAS SAS → ☑ When the Fed raises the interest rate, A. aggregate demand decreases and short-run aggregate supply increases, and the price level falls B. aggregate demand increases and real GDP increases C. aggregate demand decreases and the price level falls D. short-run aggregate supply increases and the price level falls The graph shows the long-run aggregate supply curve and the short-run aggregate supply curve. Draw the AD curve to illustrate the state of the economy that prompted the Fed to take the action described in the news clip. Label it. Draw a point at the short-run macroeconomic equilibrium. Label it 1. Draw a curve to show the result of actions taken by the Fed that move the economy back to a full-employment equilibrium. Draw a point to show the new long-run macroeconomic equilibrium. Label it 2. 100- 90- 80+ 16.0 17.0 18.0 19.0 20.0 Real GDP (trillions of 2009 dollars) >>> Draw only the objects specified in the question.
Price level (GDP deflator, 2009=100) Fed Raises Rates As Job Gains, Firming Inflation Stoke Confidence The U.S. Federal Reserve raised interest rates on Wednesday. The rate rise was the second in three months. This second rise comes in an economy that is growing faster and creating jobs at a more rapid pace. These gains are accompanied by a rising inflation rate. 140- 130- Source: Reuters, March 15, 2017 Describe the process by which the Fed's action reported in the news clip flows through the economy. 120- ... 110- LAS SAS → ☑ When the Fed raises the interest rate, A. aggregate demand decreases and short-run aggregate supply increases, and the price level falls B. aggregate demand increases and real GDP increases C. aggregate demand decreases and the price level falls D. short-run aggregate supply increases and the price level falls The graph shows the long-run aggregate supply curve and the short-run aggregate supply curve. Draw the AD curve to illustrate the state of the economy that prompted the Fed to take the action described in the news clip. Label it. Draw a point at the short-run macroeconomic equilibrium. Label it 1. Draw a curve to show the result of actions taken by the Fed that move the economy back to a full-employment equilibrium. Draw a point to show the new long-run macroeconomic equilibrium. Label it 2. 100- 90- 80+ 16.0 17.0 18.0 19.0 20.0 Real GDP (trillions of 2009 dollars) >>> Draw only the objects specified in the question.
Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations
Section: Chapter Questions
Problem 17P
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Transcribed Image Text:Price level (GDP deflator, 2009=100)
Fed Raises Rates As Job Gains, Firming Inflation Stoke Confidence
The U.S. Federal Reserve raised interest rates on Wednesday. The rate rise was the second in three months.
This second rise comes in an economy that is growing faster and creating jobs at a more rapid pace. These
gains are accompanied by a rising inflation rate.
140-
130-
Source: Reuters, March 15, 2017
Describe the process by which the Fed's action reported in the news clip flows through the economy.
120-
...
110-
LAS
SAS
→
☑
When the Fed raises the interest rate,
A. aggregate demand decreases and short-run aggregate supply increases, and the price level falls
B. aggregate demand increases and real GDP increases
C. aggregate demand decreases and the price level falls
D. short-run aggregate supply increases and the price level falls
The graph shows the long-run aggregate supply curve and the short-run aggregate supply curve.
Draw the AD curve to illustrate the state of the economy that prompted the Fed to take the action described in
the news clip. Label it.
Draw a point at the short-run macroeconomic equilibrium. Label it 1.
Draw a curve to show the result of actions taken by the Fed that move the economy back to a full-employment
equilibrium.
Draw a point to show the new long-run macroeconomic equilibrium. Label it 2.
100-
90-
80+
16.0
17.0
18.0
19.0
20.0
Real GDP (trillions of 2009 dollars)
>>> Draw only the objects specified in the question.
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