Show the effect of an increase in the natural rate of unemployment on both the long-run and short-run Phillips curves. Assume the graph represents the short-run and long-run Phillips curves before the increase in the natural rate of unemployment. 1.) Using the line drawing tool, show the effect of a higher natural rate of unemployment by drawing either a new short-run Phillips curve, a new long-run Phillips curve, or both. Label your curve(s) either 'SRPC₂' or 'LRPC₂." 2.) Using the point drawing tool, indicate the new long-run equilibrium. Label your point 'e₂." Carefully follow the instructions above and only draw the required objects. Use your graph to explain how the increase in the natural rate of unemployment lessens the effect of high unemployment on the inflation rate. With the higher natural rate of unemployment, the inflation rate is at the long-run equilibrium. Did the high unemployment rates during and immediately after the recession of 2007-2009 turn out to be permanent? Since the recession of 2007-2009, unemployment rates have O A. fallen to about 4.3 percent. OB. increased above 10 percent. O C. fallen to zero, which is the natural rate of unemployment. O D. remained high at about 10 percent. LRPC₁ e₁ Unemployment rate SRP
Show the effect of an increase in the natural rate of unemployment on both the long-run and short-run Phillips curves. Assume the graph represents the short-run and long-run Phillips curves before the increase in the natural rate of unemployment. 1.) Using the line drawing tool, show the effect of a higher natural rate of unemployment by drawing either a new short-run Phillips curve, a new long-run Phillips curve, or both. Label your curve(s) either 'SRPC₂' or 'LRPC₂." 2.) Using the point drawing tool, indicate the new long-run equilibrium. Label your point 'e₂." Carefully follow the instructions above and only draw the required objects. Use your graph to explain how the increase in the natural rate of unemployment lessens the effect of high unemployment on the inflation rate. With the higher natural rate of unemployment, the inflation rate is at the long-run equilibrium. Did the high unemployment rates during and immediately after the recession of 2007-2009 turn out to be permanent? Since the recession of 2007-2009, unemployment rates have O A. fallen to about 4.3 percent. OB. increased above 10 percent. O C. fallen to zero, which is the natural rate of unemployment. O D. remained high at about 10 percent. LRPC₁ e₁ Unemployment rate SRP
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Show the effect of an increase in the natural rate of unemployment on both the long-run and short-run Phillips curves.
Assume the graph represents the short-run and long-run Phillips curves before the increase in the natural rate of
unemployment.
1.) Using the line drawing tool, show the effect of a higher natural rate of unemployment by drawing either a new short-run
Phillips curve, a new long-run Phillips curve, or both. Label your curve(s) either 'SRPC₂' or 'LRPC2.'
2.) Using the point drawing tool, indicate the new long-run equilibrium. Label your point 'e
Carefully follow the instructions above and only draw the required objects.
Use your graph to explain how the increase in the natural rate of unemployment lessens the effect of high unemployment on
the inflation rate.
With the higher natural rate of unemployment, the inflation rate is
at the long-run equilibrium.
Did the high unemployment rates during and immediately after the recession of 2007-2009 turn out to be permanent?
Since the recession of 2007-2009, unemployment rates have
O A. fallen to about 4.3 percent.
O B. increased above 10 percent.
O C. fallen to zero, which is the natural rate of unemployment.
O D. remained high at about 10 percent.
Inflation rate
LRPC₁
e₁
Unemployment rate
SRPC₁
1
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