The following graph depicts the short-run and long-run Phillips curves (SRPC and LRPC) for a hypothetical economy in long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the current inflation rate is 8% per year.
Q: The corresponding table includes a breakdown including Inflation Rate, Unemployment Rate, Price…
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Q: Consider the Phillips curve in the graph below. Start from long run equilibrium at point Assume the…
A: Answer in step 2.
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Q: ips curves (SRPC and LRPC, respectively). 1. There is a fall in the natural rate of unemploy
A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: The long-run Phillips curve suggests which of the following? A. The economy always responds well to…
A: Answer: The long-run Phillips curve shows no trade-off between the unemployment rate and the…
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A: Philips curve shows the relationship between inflation and the unemployment rate. in the short run,…
Q: Explain why the Phillips Curve is drawn to show a positive relationship between aggregate output and…
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Q: The short-run Phillips curve intersects the long-run Phillips curve where A) the actual rate of…
A: The long run Phillips curve is a vertical curve, which represents that in long run the economy is…
Q: Compare the short-run Phillips Curve and the long-run Phillips Curve.
A: The economics as a study is based upon the basic idea that the resources which are present with the…
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A: Positive demand shock increases the aggregate demand.
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A: A.W Phillips developed the concept of Phillips curve.
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- 1. Problems and Applications Q1 Consider the following four situations: A. Actual inflation is 6 percent, and expected inflation is 6 percent. B. Actual inflation is 4 percent, and expected inflation is 6 percent. C. Actual inflation is 4 percent, and expected inflation is 4 percent. D. Actual inflation is 6 percent, and expected inflation is 4 percent.The following graph plots the short-run and long-run Phillips curves (SRPC and LRPC, respectively) for an economy currently experiencing long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the inflation rate is 8% per year. Suppose that the central bank for this economy has decided that inflation is too high and thus wants to decrease the inflation rate by 6 percentage points per year. A reduction in the rate of inflation is known as (deflation/disinflation) . To reduce inflation from 8% to 2% in the short run, the central bank would have to accept an unemployment rate of ____% True or False: If people have rational expectations, the economy may not have to endure an unemployment rate as high as predicted by the short-run Phillips curve. -True -FalseThe following graph shows an economy in long-run equilibrium at point A (grey star symbol). The vertical line is the long-run Phillips curve (LRPC). The downward-sloping curve labeled SRPC is the short-run Phillips curve passing through point A. INFLATION RATE (Percent) ཝ་ཤ་ཁ་ཀ་༥ 1 SRPC LRPC 0 0 1 2 3 UNEMPLOYMENT RATE (Percent) Which of the following is true along SRPC? The natural rate of unemployment is 2%. The actual unemployment rate is 1%. The expected inflation rate is 2%. SRPC2 с Suppose that the Fed suddenly and unexpectedly increases the money supply in an effort to reduce unemployment. As a result of this unanticipated action, actual inflation rises to 5%. On the previous graph, use the black point (plus symbol) to illustrate the short-run effects of this policy. Now, suppose that-after a period of 5% inflation-households and firms begin to expect that the inflation rate will continue to be 5%. On the previous graph, use the purple line (diamond symbol) to draw SRPC₂, the…
- 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%. 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. 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? Short-run aggregate supply curve. Explain Long-run Phillips curve. ExplainThe following graph shows an economy in long-run equilibrium at point A (grey star symbol). The vertical line is the long-run Phillips curve (LRPC). The downward-sloping curve labeled SRPC, is the short-run Phillips curve passing through point A. SRPC, LRPC 7 SRPC, 1 1 2 3 4 5 7 8 UNEMPLOYMENT RATE (Percent) Which of the following is true along SRPC,? The actual unemployment rate is 6%. The expected inflation rate is 5%. The actual inflation rate is 5%. The natural rate of unemployment is 3%. INFLATION RATE (Perent)An economy has the following equation for the Phillips Curve: π = Eπ − 0.5(u − 6)People form expectations of inflation by taking a weighted average of the previous two years of inflation: Okun’s law for this economy is: Eπ = 0.7π−1 + 0.3π−2 (Y −Y−1)/(Y-1)=3.0−2.0(u−u−1) Th economy begins at its natural rate of unemployment with a stable inflation rate of 5 percent. 1. What is the natural rate of unemployment for this economy? 2. Graph the short-run tradeoff between inflation and unemployment that this economy faces. Label the point where the economy begins as A. 3. A fall in aggregate demand leads to a recession, causing the unemployment rate to rise 4 percentage points above its natural rate. On your graph, label the point the economy experiences that year as point B.
- You observe the following short-run Phillips curve for the economy: T = 9.2 -0.26(u - 6.5%) + v. There are no supply shocks to the economy, and the actual unemployment rate is 6.5% (and will stay that way for the foreseeable future). What will expected inflation be next year? Write your answer as a percentage, and round at one (1) decimal. Do not write the percentage sign. If you need more information to answer the question, write "O".According to the St. Louis Federal Reserve the natural unemployment rate is 4.42 percent (Q4 2023 ) and the U.S. Bureau of Labor Statistics (BLS) estimates the U.S. unemployment rate (U3, October 2023 B) to be 3.9 percent. If you expect unemployment to continue to fall the short-run Phillips curve would predict: OA decrease in the inflation rate. An increase in the inflation rate. ○ A decrease in the unemployment rate. ○ An increase in the unemployment rate.The following graph plots the long-run Phillips curve (LRPC) and short-run Phillips curve (SRPC1SRPC1) for an economy currently experiencing long-run equilibrium at point A (grey star symbol). Which of the following is true along SRPC1SRPC1? -The actual unemployment rate is 6%. -The expected inflation rate is 5%. -The actual inflation rate is 5%. -The natural rate of unemployment is 3%. Suppose that the central bank for this economy suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated policy action, actual inflation falls to 3%. On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy. Suppose that now, after a period of 3% inflation, households and firms begin to expect that the inflation rate will persist at the level of 3%. On the previous graph, use the purple line (diamond symbol) to draw SRPC2SRPC2, the short-run Phillips curve that is…
- The following graph plots the long-run Phillips curve (LRPC) and short-run Phillips curve (SRPC1SRPC1) for an economy currently experiencing long-run equilibrium at point A (grey star symbol). Which of the following is true along SRPC1SRPC1? -The actual unemployment rate is 6%. -The expected inflation rate is 5%. -The actual inflation rate is 5%. -The natural rate of unemployment is 3%. Suppose that the central bank for this economy suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated policy action, actual inflation falls to 3%. On the previous graph, use the black point (plus symbol labeled "B") to illustrate the short-run effects of this policy. Suppose that now, after a period of 3% inflation, households and firms begin to expect that the inflation rate will persist at the level of 3%. On the previous graph, use the purple line (diamond symbol) to draw SRPC2SRPC2, the short-run…The Phillips curve represents the relationship between unemployment and inflation. You are required to think about the impact on the economy of movements along the curve. If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.Aggregate demand, aggregate supply, and the Phillips curve In the year 2027, aggregate demand and aggregate supply in the imaginary country of Daisen-Oki are represented by the curves AD 2027 and AS on the following graph. The price level is currently 102. The graph also shows two potential outcomes for 2028. The first possible aggregate demand curve is given by the curve labeled AD(a) curve, resulting in the outcome given by point A. The second possible aggregate demand curve is given by the curve labeled AD(b), resulting in the outcome given by point B. Suppose the unemployment rate is 7% under one of these two outcomes and 6% under the other. Based on the previous graph, you would expect (OUTCOME A or OUTCOME B) to be associated with the higher unemployment rate (7%). If aggregate demand is high in 2028, and the economy is at outcome B, the inflation rate between 2027 and 2028 is (1.96% or 5.00% or 4.00% or 2.94%). Based on your answers to the previous…