Consider a baseline long run equilibrium where output is 22 trillion dollars, and the price level is 100. Note: In the Long Run Steady State Equilibrium, Price expectation is the same as price level & unemployment is 5% or lower. None of these are guaranteed in the short run. Usually, short run equilibrium is called an underemployment equilibrium. Starting from the baseline, suppose COVID 19 hits this economy. If this disease only makes workers sick (everything else remaining constant) A Keynesian Macroeconomist proposes the use of a massive expansionary fiscal policy. Step 1) What will be the shape of the Phillips Curve (Upward / Downward/ Vertical/Horizontal). I want you to think about what variable is measured on the horizontal axis of the Phillips Curve Graph and what variable is measured in the Phillips Curve Vertical axis. Then tell us what it means to say that Phillips Curve is upward or downward sloping or vertical or horizontal Step 2) why did this policy create a downward/upward/vertical/horizontal sloping Phillips Curve?
4Consider a baseline long run equilibrium where output is 22 trillion dollars, and the price level is 100. Note: In the Long Run Steady State Equilibrium, Price expectation is the same as price level &
Starting from the baseline, suppose COVID 19 hits this economy. If this disease only makes workers sick (everything else remaining constant) A Keynesian Macroeconomist proposes the use of a massive expansionary fiscal policy.
Step 1) What will be the shape of the Phillips Curve (Upward / Downward/
Vertical/Horizontal). I want you to think about what variable is measured on the horizontal axis of the Phillips Curve Graph and what variable is measured in the Phillips Curve Vertical axis. Then tell us what it means to say that Phillips Curve is upward or downward sloping or vertical or horizontal
Step 2) why did this policy create a downward/upward/vertical/horizontal sloping Phillips Curve?
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