EBK MACROECONOMICS
12th Edition
ISBN: 8220100663307
Author: PARKIN
Publisher: PEARSON
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Chapter 12, Problem 18APA
To determine
Identify the changes in the short-run
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The inflation rate is 6 percent a year, the unemployment rate is 4 percent, and the economy is at full employment.
Draw the long-run Phillips curve. Label it LRPC.
Draw the short-run Phillips curve. Label it SRPC.
The Fed announces that it intends to slow the money growth rate to keep the inflation rate at 3 percent a year for the foreseeable
future. People believe the Fed.
Draw an arrow along a curve to show the change in the inflation rate and the unemployment rate in the short run and in the long run.
1
10-
8-
6
4-
2-
Inflation rate (percent per year)
G
I need help soon as possible can you add full steps please.
The Phillips Curve
Chapter 12 Solutions
EBK MACROECONOMICS
Ch. 12.1 - Prob. 1RQCh. 12.1 - Prob. 2RQCh. 12.1 - Prob. 3RQCh. 12.1 - Prob. 4RQCh. 12.1 - Prob. 5RQCh. 12.2 - Prob. 1RQCh. 12.2 - Prob. 2RQCh. 12.2 - Prob. 3RQCh. 12.2 - Prob. 4RQCh. 12.2 - Prob. 5RQ
Ch. 12.2 - Prob. 6RQCh. 12.2 - Prob. 7RQCh. 12.3 - Prob. 1RQCh. 12.3 - Prob. 2RQCh. 12.3 - Prob. 3RQCh. 12.3 - Prob. 4RQCh. 12.3 - Prob. 5RQCh. 12.3 - Prob. 6RQCh. 12.4 - Prob. 1RQCh. 12.4 - Prob. 2RQCh. 12.4 - Prob. 3RQCh. 12.4 - Prob. 4RQCh. 12 - Prob. 1SPACh. 12 - Prob. 2SPACh. 12 - Prob. 3SPACh. 12 - Prob. 4SPACh. 12 - Prob. 5SPACh. 12 - Prob. 6SPACh. 12 - Prob. 7SPACh. 12 - Prob. 8SPACh. 12 - Prob. 9APACh. 12 - Prob. 10APACh. 12 - Prob. 11APACh. 12 - Prob. 12APACh. 12 - Prob. 13APACh. 12 - Prob. 14APACh. 12 - Prob. 15APACh. 12 - Prob. 16APACh. 12 - Prob. 17APACh. 12 - Prob. 18APACh. 12 - Prob. 19APACh. 12 - Prob. 20APACh. 12 - Prob. 21APACh. 12 - Prob. 22APACh. 12 - Prob. 23APACh. 12 - Prob. 24APA
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- the consumer price index can be used to measure inflation. there are potential problems with this process though that can result in inflation being overstated or understated. place each statement to according if it would cause inflation to be overstated, understated, or be an accurate representation of inflation. causes inflation to be overstated causes inflation to be understated does not cause inflation to be overstated or understated Answer BANK: Mary and Bob replace their old minivan with a new one. The new van costs 15% more than the old van, but the new model has many updated features like a camera to assist with backing up, GPS and better fuel economy. Donna, a confirmed chocoholic, notices that her favorite candy bar shrank in size, but its price stayed the same. Zach loves bagels, but bagels are becoming more expensive so he changes his breakfast routine to include a muffin instead because muffins remain relatively cheap. Chris is an avid…arrow_forwarda) What is Phillips curve? Draw the short-run Phillips curve and the long-run Phillips curve. Explain why they are different. b) Suppose the economy is in a long-run equilibrium. Suppose a wave of business pessimism reduces aggregate demand. Show the effect of this shock on your diagram from part (a). If the RBI undertakes expansionary/contractionary monetary policy, can it return the economy to its original inflation rate and original unemployment rate? (b) What is sacrifice ratio?arrow_forwardK14arrow_forward
- unemployment In the short run in the inflation rate and 4. Monetary policy and the Phillips curve The following graph plots the short-run Phillips curve for a hypothetical economy. The given point on the graph indicates the initial rates of unemployment and inflation. Assume that the economy is currently in long-run equilibrium, Suppose the central bank of the hypothetical economy decides to increase 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. BATE INFLATION RATE (Parcent) On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the increase in the money supply UNEMPLOYMENT RATE (Percent) In the long run, the increase in the money supply results in (relative to the economy's initial equilibrium). ·0 in the inflation rate and in the…arrow_forwardSUDmit test The graph shows the short-run and long-run Phillips curves. The current inflation rate is 5 percent a year. Inflation rate (percent per year) 12.5- LRPC The Fed announces that it will increase the money growth rate so that the inflation rate will rise to 6 percent a year. 10.0- If no one believes the Fed and expected inflation remains at 5 percent a year, explain the effect of the Fed's action on inflation and unemployment next year. Choose the correct statement. 7.5- 5.0- O A. The inflation rate rises and the unemployment rate will increase in a movement up the long-run Phillips curve. SRPC O B. The unemployment rate will decrease but inflation will not change. 2.5- OC. Nothing will happen. It takes more than a year for unemployment and inflation to begin to respond to a speed up in money growth. 0.0- O D. The inflation rate rises and the unemployment rate decreases in a movement up the short-run Phillips curve. 10 Unemployment rate (percent of labor force) empts Nextarrow_forwardI need help soon as possible please. I only have one hour to finish.arrow_forward
- a) Chose a tool the Central Bank (the Fed) might use to fight inflation. b) How would it be use? c) How would it cause inflation to fall?arrow_forwardInflation debate. The Federal Reserve and Congress both responded to the COVID pandemic in an attempt to boost output. Some economists are worried that the most recent fiscal policy implemented by Congress will lead to increases in inflation. (a) Illustrate how the impacts of COVID and the responses of the Fed and Congress could cause inflation to increase using the IS-MP and Phillips graphs. Label as much as possible. (b) Explain your graphs in wordsarrow_forwardWhat does the short-run Phillips curve predict will happen to inflation and unemployment if the Bank of Canada were to reduce the growth rate of the money supply?Select one:a. inflation would fall, but unemployment would riseb. inflation and unemployment would both risec. inflation would rise, but unemployment would falld. inflation and unemployment would both fallarrow_forward
- 39. Model the Phillips curve and explain what the curve means in terms of policy.arrow_forwardA politician blames the Federal Reserve for being "soft on unemployment" and claims that a permanently higher money supply growth rate will lead to a permanent reduction in the unemployment rate. The politician's argument is a. consistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would not increase inflation. b. inconsistent with the long-run Phillips curve. Further, the long-run Phillips curve implies that such a policy would increase inflation. c. inconsistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would not increase inflation. d. consistent with the long-run Phillips curve. However, the long-run Phillips curve implies that such a policy would increase inflation.arrow_forwardIf the government uses contractionary monetary policy to reduce inflation from 9 to 6 percent. If people have adaptive expectations, than Inflation rate (%) 12 10 9 8 6 4 0 4 Long run Phillips curve Natural rate 5 E Short run Phillips curve 9 Unemployment rate (%) Unemployment will rise to 8 percent in the short run. The natural rate will permanently increase to 8 percent The economy will remain stuck at point E1. Unemployment will remain at 6 percent as the inflation rate falls.arrow_forward
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