Short-run Phillips curve .
Explanation of Solution
Figure 1 shows the short-run Phillips curve.
In Figure 1, the vertical axis measures the inflation rate and the horizontal axis measures the
Concept introduction:
Philips curve: Short-run Phillips curve shows the inverse relationship between inflation and unemployment. The short-run Phillips curve is a downward sloping curve.
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Chapter 35 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
- Why rising commodity prices and wages might lead to cost-push inflation?arrow_forwardWhy is there no upward or downward pressure on the inflation rate when the economy is at full employment?arrow_forwardIf there is a decrease in inflation what happens to aggregate supply. Aggregate demand would shift downwards because it would fall but would supply be affected by this? With this shift in inflation and the decrease in demand what would policy makers do in response to this?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_forwardHow can demand-pull inflation lead to cost-push inflation?arrow_forwardWhat are the goals of economic policy? Describe each briefly. What policy options does the government and the Feds have at their disposal to counter. Economic recession and inflation. Describe and list each brieflyarrow_forward
- What can be used to reduce aggregate demand and thereby control demand pull inflation? One wordarrow_forwardSuppose an economy has a high rate of unemployment and a high rate of inflation. What kind of policy measures would you suggest to fight inflation and increase employment?arrow_forwardExplain what we can understand by expected inflation, inflation due to an increase in aggregate demand or inflation due to a decrease in aggregate supply.arrow_forward
- Explain in details how high inflation can lead to a recession in several ways.arrow_forwardWhy do we care about price stability ? Group of answer choices All of the options. It is one of the mandates of the Fed set by the Congress. It helps in achieving maximum stable output, another mandate of the Fed set by the Congress Which is correct?arrow_forwardwhen the economy approaches fall employment why does demand pull inflation become a problem?arrow_forward
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
