The following graph plots a short-run Phillips curve for a hypothetical economy. Show the short-run effect of a contractionary monetary policy by dragging the point along the short-run Phillips curve (SRPC) or shifting the curve to the appropriate position. INFLATION RATE (Percent) 12 INFLATION RATE (Percent) 11 10 1 0 12 1 10 2 As anticipated, inflation Now, show the long-run effect of a contractionary monetary policy by dragging either the short-run Phillips curve (SRPC), the long-run Phillips curve (LRPC), or both. SRPC UNEMPLOYMENT (Percent) 2 LRPC SRPC 5 UNEMPLOYMENT (Percent) 5 SRPC and the short-run Phillips curve shifts SRPC LRPC Which of the following examples represents a cost of inflation? Check all that apply. A general decrease in purchasing power Increased variability of relative prices A coffee shop's costs to reprint its menu to reflect fluctuating prices An unintended redistribution of wealth from borrowers to lenders , highlighting the cost of fighting inflation, which is

The following graph plots a short-run Phillips curve for a hypothetical economy. Show the short-run effect of a contractionary monetary policy by dragging the point along the short-run Phillips curve (SRPC) or shifting the curve to the appropriate position. INFLATION RATE (Percent) 12 INFLATION RATE (Percent) 11 10 1 0 12 1 10 2 As anticipated, inflation Now, show the long-run effect of a contractionary monetary policy by dragging either the short-run Phillips curve (SRPC), the long-run Phillips curve (LRPC), or both. SRPC UNEMPLOYMENT (Percent) 2 LRPC SRPC 5 UNEMPLOYMENT (Percent) 5 SRPC and the short-run Phillips curve shifts SRPC LRPC Which of the following examples represents a cost of inflation? Check all that apply. A general decrease in purchasing power Increased variability of relative prices A coffee shop's costs to reprint its menu to reflect fluctuating prices An unintended redistribution of wealth from borrowers to lenders , highlighting the cost of fighting inflation, which is

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter17: The Philips Curve And Expetactions Theory

Section: Chapter Questions

Problem 2SQ

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The following graph illustrates long-run and short-run Phillips curves for an economy that is currently at point A. Long-Run Phillips Curve SRPC, SRPC SRPC Unemplayment Rate To reduce inflation, the Fed uses contractionary policy. In the short run, the economy moves from point A to point E In the long run, the economy will move to point This illustrates that the benefits v of reducing inflation are temporary and the costs of reducing inflation are permanent. Inflation Rate
4. Monetary policy and the Phillips curve The following graph shows the current short-run Phillips curve for a hypothetical economy; the point on the graph shows the initial unemployment rate and inflation rate. Assume that the economy is currently in long-run equilibrium. Suppose the central bank of the hypothetical economy decides to decrease the money supply. On the following graph, shift the short-run (SR) Phillips 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. INFLATION RATE (Percent) 8 5 3 N 1 0 0 3 9 SR Phillips Curve 8 12 UNEMPLOYMENT RATE (Percent) 15 18 In the short run, an unexpected decrease in the money supply results in unemployment rate. SR Phillips Curve in the inflation rate and in the
According to the figure below, 8. Rightward AS shifts cause leftward Phillips curve shifts PC, PC, 6. 2. 1. 2 3 4. 8. Unemployment Rate (percent) What inflation rate would occur if the unemployment rate were 7 percent, with Instructions: Round your responses to the nearest O5 percent (eg. 1.0, 15, 2 0) a. PC? b- PC2? Inflation Rate (percent) 3.
The accompanying graph depicts the Short-Run Phillips O Curve (SRPC) when the public expects no inflation in the economy. Macmillan Learning a. According to this SRPC, what would inflation be if unemployment is 9%? 0 Incorrect b. Please move the SRPC line to reflect what would happen if the public's inflation expectations increased so that they now expect the inflation rate to increase by 2%. c. If the unemployment rate is still 9%, what is the new inflation rate after this change in expectations? % 2 % Inflation rate (%) 7 6 5 4 3 2 1 0 -1 -2 -3 0 1 SRPC 2 3 4 5 6 Unemployment rate (%) 7 8 9 10
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 a short-run Phillips curve for a hypothetical economy. Show the short-run effect of a contractionary monetary policy by dragging the point along the short-run Phillips curve (SRPC) or shifting the curve to the appropriate position. Now, show the long-run effect of a contractionary monetary policy by dragging either the short-run Phillips curve (SRPC), the long-run Phillips curve (LRPC), or both. As anticipated, inflation (rises/falls) and the short-run Phillips curve shifts (downward/upward) , highlighting the cost of fighting inflation, which is (higher unemployment in the long run/temporary unemployment/lower unemployment) . Which of the following examples represents a cost of inflation? Check all that apply. -An unintended redistribution of wealth from borrowers to lenders -A general decrease in purchasing power -Increased variability of relative prices -A coffee shop’s costs to reprint its menu to reflect fluctuating prices
What is the effect of an increase in aggregate demand on the short-run Phillips curve? When aggregate demand increases, _______. A. the short-run Phillips curve shifts upward B. the short-run Phillips curve shifts downward C. a movement occurs upward along the short-run Phillips curve D. a movement occurs downward along the short-run Phillips curve
Explain why the Phillips Curve is drawn to show a positive relationship betweenaggregate output and inflation, and why a move up the curve to an aboveequilibrium output level may be followed by an upward shift of the whole curve
According to the figure below, Inflation Rate (percent) 8 7 6 3 2 1 0 b. PC2? PC2 % 1 % 2 PC₁ 3 4 Rightward AS shifts cause leftward Phillips curve shifts. 5 6 What inflation rate would occur if the unemployment rate were 5 percent, with Instructions: Round your responses to the nearest 0.5 percent (e.g., 1.0, 1.5, 2.0). a. PC₁? Unemployment Rate (percent) 7 8
In a certain economy, the expectations-augmented Phillips curve is π = T²2(u - u) and u=0.06. a. Graph the Phillips curve of this economy for an expected inflation rate of 0.10. If the central bank chooses to keep the actual inflation rate at 0.10, what will be the unemployment rate?
Suppose that the central bank has the policy "set R equal to 3 if inflation equals 2% and GAP = 0. Raise R by 0.5 points for every point of inflation above 2%. Reduce R by 0.5 points for every point that inflation falls shortof 2%. Increase R by 1 point for every percentage point of GAP, if GAP > 0. Reduce R by 1 point for every percentage point of GAP, if GAP < 0." All but one of the following is an equation that is consistent with this rule. Which is the exception? OR-3+0.5( - 2) + GAP OF-2+1.5n + GAP OF- 3+0.5(n - 2) + GAP + n R-2+n+ GAP
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…