Principles of Economics, 7th Edition (MindTap Course List)
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 35, Problem 2PA

Sub part (a):

To determine

Changes in short run and long run Phillips curve.

Sub part (b):

To determine

Changes in short run and long run Phillips curve.

Sub part (c):

To determine

Changes in short run and long run Phillips curve.

Sub part (d):

To determine

Changes in short run and long run Phillips curve.

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On a given short-run Phillips curve which of the following is held constant?   a. the level of GDP   b. employment   c. the unemployment rate   d. expected inflation
Assume that the economy of Country X has an actual unemployment rate of 7%, a natural rate of unemployment of 5%, and an inflation rate of 3%. a. Using the numerical values given above, draw a correctly labeled graph of the short-run and long-run Phillips curves. Label the current short-run equilibrium as point B. Plot the numerical values above on the graph. b. Assume that the government of Country X takes no policy action to reduce unemployment. In the long run, will each of the following shift to the right, shift to the left, or remain the same? i. Short-run aggregate supply curve. Explain. ii. Long-run Phillips curve c. Identify a fiscal policy action that could be used to reduce the unemployment rate in the short run. d. Draw a correctly labeled graph of aggregate demand and short-run aggregate supply, and show the impact on the equilibrium price level and real gross domestic product (GDP) of the fiscal policy action identified in part (c). e. Based on the change in real GDP…
To pursue economic growth in the middle of the pandemic, the government decided to increase the government’s spending. Illustrate the effects of this policy by drawing the short run Phillips curves! What would happen in the long run?
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