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Q1 had been answered, Q2 is a continuing question. One of the image is the answer of Q1.  Q2: Continuing from Question 1: What will be the shape of the Phillips Curve because of the policy that you selected in Step 2 (of Question 1)? Why? Please explain in detail. •You should answer each step in the following the answer 2 table.

Q1 had been answered, Q2 is a continuing question. One of the image is the answer of Q1.  Q2: Continuing from Question 1: What will be the shape of the Phillips Curve because of the policy that you selected in Step 2 (of Question 1)? Why? Please explain in detail. •You should answer each step in the following the answer 2 table.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter23: Aggregate Demand And Aggregate Supply
Section: Chapter Questions
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Q1 had been answered, Q2 is a continuing question. One of the image is the answer of Q1. 

Q2: Continuing from Question 1: What will be the
shape of the Phillips Curve because of the policy
that you selected in Step 2 (of Question 1)? Why?
Please explain in detail.
•You should answer each step in the following the answer 2 table. 

+Q1: Steps Your Answers Step 1) What happens in the short run to short run equilibrium price level and aggregate quantity & why? (Think about which curve shifts in which direction and why & where is the new short run equilibrium?)< Due to Covid 19 now workers fall sick. So the supply of labor will decrease in the market, that leads to increase factor price, it will reduce aggregate supply in the market. Due to the left side shift of AS to AS1 it will reduce aggregate supply, it leads to increase price level and decrease the output level.< Supply shock de to Covid is temporary shock. So here initial objective to reduce prices. Firstly, contractionary monetary policy will be used to reduce inflation by increasing interest rate.< Step 2) What policies would you propose now (Monetary/Fiscal; Expansionary/contractionary)? As you know by now there are many different ways to implement Fiscal and Monetary policies. Which method did you select? (Cutting taxes, increasing taxes, reducing government expenditure, increasing government expenditure for fiscal policies, & lowering reserve ratio, increasing reserve ratio, OMO buying bonds, OMO selling bonds etc. for monetary policies.)< Step 3) Based on the policy you selected in Step 2. It will shift AD left side. It will reduce output in tell us which way will what curve shift?< economy. Step 4) What is the final objective of the policies that you selected in Step 2? Do you want full employment? Do you want to low inflation? You want to say what objectives can you attain using the policies you selected in step 2. In next phase government can use expansionary policy which will directly increase the AD and and it will supply more factor then AS will increase in an economy, it will restore the output and price level at natural level of output. As it is temporary shock. It will be restored to natural level of output.
Transcribed Image Text:+Q1: Steps Your Answers Step 1) What happens in the short run to short run equilibrium price level and aggregate quantity & why? (Think about which curve shifts in which direction and why & where is the new short run equilibrium?)< Due to Covid 19 now workers fall sick. So the supply of labor will decrease in the market, that leads to increase factor price, it will reduce aggregate supply in the market. Due to the left side shift of AS to AS1 it will reduce aggregate supply, it leads to increase price level and decrease the output level.< Supply shock de to Covid is temporary shock. So here initial objective to reduce prices. Firstly, contractionary monetary policy will be used to reduce inflation by increasing interest rate.< Step 2) What policies would you propose now (Monetary/Fiscal; Expansionary/contractionary)? As you know by now there are many different ways to implement Fiscal and Monetary policies. Which method did you select? (Cutting taxes, increasing taxes, reducing government expenditure, increasing government expenditure for fiscal policies, & lowering reserve ratio, increasing reserve ratio, OMO buying bonds, OMO selling bonds etc. for monetary policies.)< Step 3) Based on the policy you selected in Step 2. It will shift AD left side. It will reduce output in tell us which way will what curve shift?< economy. Step 4) What is the final objective of the policies that you selected in Step 2? Do you want full employment? Do you want to low inflation? You want to say what objectives can you attain using the policies you selected in step 2. In next phase government can use expansionary policy which will directly increase the AD and and it will supply more factor then AS will increase in an economy, it will restore the output and price level at natural level of output. As it is temporary shock. It will be restored to natural level of output.
Answer 2) Steps Step 1) What will be the shape of the Phillips Curve (Upward / Downward/ Vertical/Horizontal). I want you to think about what variable is measured on the horizontal axis of the Phillips Curve Graph and what variable is measured in the Phillips Curve Vertical axis. Then tell us what it means to say that Phillips Curve is upward or downward sloping or vertical or horizontal Step 2) Remember the policy you picked in Step 2 of Question 1: It was one of these: [ (Monetary/Fiscal; Expansionary/contractionary)? As you know by now there are many different ways to implement Fiscal and Monetary policies. Which method did you select? (Cutting taxes, increasing taxes, reducing government expenditure, increasing government expenditure for fiscal policies, & lowering reserve ratio, increasing reserve ratio, OMO buying bonds, OMO selling bonds etc. for monetary policies.)] why did this policy create a downward/upward/vertical/horizontal sloping Phillips Curve? Your Answers
Transcribed Image Text:Answer 2) Steps Step 1) What will be the shape of the Phillips Curve (Upward / Downward/ Vertical/Horizontal). I want you to think about what variable is measured on the horizontal axis of the Phillips Curve Graph and what variable is measured in the Phillips Curve Vertical axis. Then tell us what it means to say that Phillips Curve is upward or downward sloping or vertical or horizontal Step 2) Remember the policy you picked in Step 2 of Question 1: It was one of these: [ (Monetary/Fiscal; Expansionary/contractionary)? As you know by now there are many different ways to implement Fiscal and Monetary policies. Which method did you select? (Cutting taxes, increasing taxes, reducing government expenditure, increasing government expenditure for fiscal policies, & lowering reserve ratio, increasing reserve ratio, OMO buying bonds, OMO selling bonds etc. for monetary policies.)] why did this policy create a downward/upward/vertical/horizontal sloping Phillips Curve? Your Answers
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