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The Phillips Curve and Inflation - End of Chapter Problem The economy is currently producing 5% less output than its potential. In an attempt to boost output, the federal government announces an unexpected stimulus package that you expect will increase output to 5% above potential. a. Move the point on the Phillips curve to illustrate the relationship between unexpected inflation and the output gap after the stimulus. Unexpected Inflation -1 -2 -3 4 Phillips Curve 3 2 0 -1211-10-9-8-7-6-5-4-3-2-10 1 2 3 4 5 6 7 8 9 1011 12 Output gap

The Phillips Curve and Inflation - End of Chapter Problem The economy is currently producing 5% less output than its potential. In an attempt to boost output, the federal government announces an unexpected stimulus package that you expect will increase output to 5% above potential. a. Move the point on the Phillips curve to illustrate the relationship between unexpected inflation and the output gap after the stimulus. Unexpected Inflation -1 -2 -3 4 Phillips Curve 3 2 0 -1211-10-9-8-7-6-5-4-3-2-10 1 2 3 4 5 6 7 8 9 1011 12 Output gap

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The Phillips Curve and Inflation - End of Chapter Problem The economy is currently producing 5% less output than its potential. In an attempt to boost output, the federal government announces an unexpected stimulus package that you expect will increase output to 5% above potential. a. Move the point on the Phillips curve to illustrate the relationship between unexpected inflation and the output gap after the stimulus. Unexpected Inflation -1 -2 -3 4 Phillips Curve 3 2 0 -1211-10-9-8-7-6-5-4-3-2-10 1 2 3 4 5 6 7 8 9 1011 12 Output gap
Transcribed Image Text:The Phillips Curve and Inflation - End of Chapter Problem The economy is currently producing 5% less output than its potential. In an attempt to boost output, the federal government announces an unexpected stimulus package that you expect will increase output to 5% above potential. a. Move the point on the Phillips curve to illustrate the relationship between unexpected inflation and the output gap after the stimulus. Unexpected Inflation -1 -2 -3 4 Phillips Curve 3 2 0 -1211-10-9-8-7-6-5-4-3-2-10 1 2 3 4 5 6 7 8 9 1011 12 Output gap
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