Q1. Phillip's Curve: For each of the following draw an AD-AS diagram and a corresponding Phillip's curve assuming the following: (1) actual RGDP is $9,200 (2) full employment RGDP is $10,000 (3) the natural rate of unemployment is 5%; (4) actual unemployment fluctuates around 5% a. Show in both diagrams the effect of an increase in government purchases that pushes actual RGDP up to full employment b. Again assume actual GDP is at $9,200, show in both diagrams the effect of the Federal Reserve bank selling versus buying treasury bonds to banks. c. Again assume actual GDP is at $9,200, show in both diagrams the effect of self-correction mechanism.

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Q1. Phillip's Curve: For each of the following draw an AD-AS diagram and a corresponding
Phillip's curve assuming the following: (1) actual RGDP is $9,200 (2) full employment RGDP is
$10,000 (3) the natural rate of unemployment is 5%; (4) actual unemployment fluctuates around
5%
a. Show in both diagrams the effect of an increase in government purchases that pushes actual
RGDP up to full employment
b. Again assume actual GDP is at $9,200, show in both diagrams the effect of the Federal
Reserve bank selling versus buying treasury bonds to banks.
c. Again assume actual GDP is at $9,200, show in both diagrams the effect of self-correction
mechanism.
Transcribed Image Text:Q1. Phillip's Curve: For each of the following draw an AD-AS diagram and a corresponding Phillip's curve assuming the following: (1) actual RGDP is $9,200 (2) full employment RGDP is $10,000 (3) the natural rate of unemployment is 5%; (4) actual unemployment fluctuates around 5% a. Show in both diagrams the effect of an increase in government purchases that pushes actual RGDP up to full employment b. Again assume actual GDP is at $9,200, show in both diagrams the effect of the Federal Reserve bank selling versus buying treasury bonds to banks. c. Again assume actual GDP is at $9,200, show in both diagrams the effect of self-correction mechanism.
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