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 increase the money supply. 1. 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. (Please use the image attached)

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Chapter1: Making Economics Decisions
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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 increase the money supply.

1. 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. (Please use the image attached)

2. In the short run, an unexpected increase in the money supply results in a decrease? an increase? no change? in the inflation rate and a decrease? an increase? no change?  in the unemployment rate.

6
SR Phillips Curve
5
SR Phillips Curve
3
12
15
18
UNEMPLOYMENT RATE (Percent)
3.
2.
INFLATION RATE (Percent)
Transcribed Image Text:6 SR Phillips Curve 5 SR Phillips Curve 3 12 15 18 UNEMPLOYMENT RATE (Percent) 3. 2. INFLATION RATE (Percent)
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