EBK MACROECONOMICS
EBK MACROECONOMICS
12th Edition
ISBN: 8220100663307
Author: PARKIN
Publisher: PEARSON
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Chapter 12, Problem 17APA
To determine

Illustrate graphically the short-run Philips curve (SRPC) and the long-run Philips curve (LRPC). 

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The Phillips Curve and Inflation - End of Chapter Problem Recently, policy makers have debated whether an increase in the federal minimum wage, currently at $7.25 an hour, would be good for the economy. Determine how each of the given scenarios affects the Phillips curve. a. Policy makers announce that effective next week, the federal minimum wage will be $15 an hour. This will cause the Phillips curve to shift upward b. Policy makers announce that the federal minimum wage will increase to $15 an hour over the next 10 years by annual the Phillips curve to shift upward increases of $0.78. This will cause c. Explain how the initial increase in the federal minimum wage for low-wage earners could lead to a wage-price spiral throughout the economy. The increase in wages increases disposable income. This in turn leads to greater demand, which in turn results in higher prices.
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