Please answer the stuff in the red brackets, I included the information before as context. The following graph shows an economy in long-run equilibrium at point A (grey star symbol). The vertical line is the long-run Phillips curve (LRPC).The downward-sloping curve labeled SRPC, is the short-run Phillips curve passing through point A.SRPC,LRPC7SRPC,21123478UNEMPLOYMENT RATE (Percent)INFLATION RATE (Percent) Suppose that the Fed suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated action,actual inflation falls to 3%.On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy.Now, suppose that-after a period of 3% inflation-households and firms begin to expect that the inflation rate will continue to be 3%.On the previous graph, use the purple line (diamond symbol) to draw SRPC2, the short-run Phillips curve that is consistent with these expectations,assuming that it is parallel to SRPC.Finally, using the orange point (square symbol labeled "C"), indicate on the previous graph the new, long-run equilibrium for this economy.The inflation rate at point C isthe infiation rate at point A, and the unemployment rate at point C istheunemployment rate at point A.Was the Fed able to achieve its goal of lowering inflation?O No, because the Fed cannot affect the inflation rate through monetary policy.O Yes, but only in the short run; in the long run, inflation returned to its natural rate.O Yes, the Fed's policy successfully reduced inflation in both the short run and the long run.

Philip’s curve (short-run) shows the relationship between the unemployment rate and the inflation…

The inflation rate at point C is the inflation rate at point A, and the unemployment rate at point C is the unemployment rate at point A. Was the Fed able to achieve its goal of lowering inflation? No, because the Fed cannot affect the inflation rate through monetary policy. Yes, but only in the short run; in the long run, inflation returned to its natural rate. Yes, the Fed's policy successfully reduced inflation in both the short run and the long run.

The inflation rate at point C is the inflation rate at point A, and the unemployment rate at point C is the unemployment rate at point A. Was the Fed able to achieve its goal of lowering inflation? No, because the Fed cannot affect the inflation rate through monetary policy. Yes, but only in the short run; in the long run, inflation returned to its natural rate. Yes, the Fed's policy successfully reduced inflation in both the short run and the long run.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter17: The Philips Curve And Expetactions Theory

Section: Chapter Questions

Problem 1SQP

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The following graph shows an economy in long-run equilibrium at point A (grey star symbol). The vertical line is the long-run Phillips curve (LRPC). The downward-sloping curve labeled SRPC, is the short-run Phillips curve passing through point A. SRPC, LRPC 7 SRPC, 1 1 2 3 4 5 7 8 UNEMPLOYMENT RATE (Percent) Which of the following is true along SRPC,? The actual unemployment rate is 6%. The expected inflation rate is 5%. The actual inflation rate is 5%. The natural rate of unemployment is 3%. INFLATION RATE (Perent)
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The following graph shows an economy in long-run equilibrium at point A (grey star symbol). The vertical line is the long-run Phillips curve (LRPC). The downward-sloping curve labeled SRPC, is the short-run Phillips curve passing through point A. SRPC, LRPC 7 SRPC, 2 1 1 2 3 4 7 8 UNEMPLOYMENT RATE (Percent) INFLATION RATE (Percent)
1. Problems and Applications Q1 Consider the following four situations: A. Actual inflation is 6 percent, and expected inflation is 6 percent. B. Actual inflation is 4 percent, and expected inflation is 6 percent. C. Actual inflation is 4 percent, and expected inflation is 4 percent. D. Actual inflation is 6 percent, and expected inflation is 4 percent.
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The following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC). PRICE LEVEL INFLATION RATE 0 3 LRAS 4 5 LRPC 9 AD O AD LRAS 6 12 UNEMPLOYMENT RATE (Percent) 15 SRPC 18 Ⓒ SRPC - LRPC