4. The costs of inflation and of combating inflationThe following graph shows a short-run Phillips curve for a hypothetical economy.Show the short-run effect of a contractionary monetary policy by dragging the point along theshort-run Phillips curve (SRPC) or shifting the curve to the appropriate position.INFLATION RATE (Percent)121110987CD103₂22100|SRPC123UNEMPLOYMENT (Percent)56SRPC Now, show the long-run effect of a contractionary monetary policy by dragging either the short-runPhillips curve (SRPC), the long-run Phillips curve (LRPC), or both.INFLATION RATE (Percent)1211109876in3₂22100LRPC1SRPC23UNEMPLOYMENT (Percent)As expected, inflationthat the cost of fighting inflation is56SRPCLRPCand the short-run Phillips curve shiftsWhich of the following is an example of a cost of inflation? Check all that apply.A general decrease in purchasing powerIncreased variability of relative pricesAn unintended redistribution of wealth from borrowers to lendersA restaurant's costs to reprint its menu to reflect fluctuating pricesillustrating

The Phillips curve depicts the correlation between the unemployment rate and the rate of inflation.…

The following graph shows a short-run Phillips curve for a hypothetical economy. Show the short-run effect of a contractionary monetary policy by dragging the point along the short-run Phillips curve (SRPC) or shifting the curve to the appropriate position. INFLATION RATE (Percent) 12 11 10 9 8 7 w 2 1 0 0 1 1 1 SRPC 2 3 UNEMPLOYMENT (Percent) 4 5 6 SRPC

The following graph shows a short-run Phillips curve for a hypothetical economy. Show the short-run effect of a contractionary monetary policy by dragging the point along the short-run Phillips curve (SRPC) or shifting the curve to the appropriate position. INFLATION RATE (Percent) 12 11 10 9 8 7 w 2 1 0 0 1 1 1 SRPC 2 3 UNEMPLOYMENT (Percent) 4 5 6 SRPC

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Inflation rate Phillips curve, Phillips curveo Unemployment rate In the given graph of the Phillips curve, which of the following would have caused the Phillips curve to shift as shown? Conducting contractionary monetary policy when the economy is at its short-run equilibrium. Conducting expansionary monetary policy when the economy is at its short-run equilibrium. Conducting contractionary monetary policy when the economy is at its long-run equilibrium. 1 Conducting expansionary monetary policy when the economy is at its long-run equilibrium.
Second wave of Coronavirus infection has a potential effect on GDP growth. The government tries to use monetary policy to alleviate the problem. Use the Keynesian’s short-run and long-run Phillips curves to explain whether an expansionary monetary policy can lower the natural rate of unemployment temporarily or permanently. Also, draw three graphs: the labor market, AD-AS, and Phillips curve diagram
The long-run effects of monetary policy The following graphs plot the long-run equilibrium situation for an economy. The first graph plots the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second graph plots the long-run and short-run Phillips curves (LRPC and SRPC, respectively). LRAS H AD 3 6 9 12 OUTPUT (Trillions of dollars) PRICE LEVEL 0 15 18 AD 441 LRAS
In a certain economy, the expectations-augmented Phillips curve is π = T²2(u - u) and u=0.06. a. Graph the Phillips curve of this economy for an expected inflation rate of 0.10. If the central bank chooses to keep the actual inflation rate at 0.10, what will be the unemployment rate?
Suppose that the central bank has the policy "set R equal to 3 if inflation equals 2% and GAP = 0. Raise R by 0.5 points for every point of inflation above 2%. Reduce R by 0.5 points for every point that inflation falls shortof 2%. Increase R by 1 point for every percentage point of GAP, if GAP > 0. Reduce R by 1 point for every percentage point of GAP, if GAP < 0." All but one of the following is an equation that is consistent with this rule. Which is the exception? OR-3+0.5( - 2) + GAP OF-2+1.5n + GAP OF- 3+0.5(n - 2) + GAP + n R-2+n+ GAP
Solve this economic If the Fed is able to permanently reduce the inflation rate, households will eventually lower their expectation of the inflation rate. Once that happens, the Phillips curve will shift ________, and the Fed can return output to potential GDP by ________ the real interest rate.Select one: a)up; lowering b) up; raising c) down; raising d) down; lowering
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4. Monetary policy and the Phillips curve The following graph shows the current short-run Phillips curve for a hypothetical economy; the point on the graph shows the initial unemployment rate and inflation rate. Assume that the economy is currently in long-run equilibrium. Suppose the central bank of the hypothetical economy decides to decrease the money supply. On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the short-run effects of this policy. Hint: You may assume that the central bank's move was unanticipated. 6 SR Phillips Curve SR Phillips Curve 1 4. 6. 8 10 12 UNEMPLOYMENT RATE (Percent) 4. 2) INFLATION RATE (Percent)
As with demand and supply analysis, changes in the economy can cause both shifts of and movements along the short-run Phillips curve. Which of the following would cause a shift of the short-run Phillips curve? Check all that apply. An increase in government spending A decrease in short-run aggregate supply An increase in the expected inflation rate
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A well-known economic model called the Phillips curve (discussed in the Keynesian Perspective chapter) describes the short run trade off typically observed between inflation and unemployment. Based on the discussion of expansionary and contraction monetary policy, explain why one of these variables usually falls when the other rises.