Suppose a Federal Reserve System Chairman known to have no interest in fighting inflation is appointed when the economy finds itself in the short-run equilibrium shown in the figure to the right. Given the chairman's preferences, it may be anticipated that monetary policy will be eased 1.) Using the line drawing tool in the accompanying figure, illustrate the consequence of this autonomous monetary policy change. Draw the curve such that a new long-run equilibrium is achieved. 2.) Using the point drawing tool, identify the new long-run equilibrium. Label this point 2. Carefully follow the instructions above, and only draw the required objects. Inflation Rate (percent) LRAS1 AS1 Q Q AD1 YPAggregate Output, Y ($ trillions)

Suppose a Federal Reserve System Chairman known to have no interest in fighting inflation is appointed when the economy finds itself in the short-run equilibrium shown in the figure to the right. Given the chairman's preferences, it may be anticipated that monetary policy will be eased 1.) Using the line drawing tool in the accompanying figure, illustrate the consequence of this autonomous monetary policy change. Draw the curve such that a new long-run equilibrium is achieved. 2.) Using the point drawing tool, identify the new long-run equilibrium. Label this point 2. Carefully follow the instructions above, and only draw the required objects. Inflation Rate (percent) LRAS1 AS1 Q Q AD1 YPAggregate Output, Y ($ trillions)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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