The economy of Djibulistan is initially in long-run equilibrium. Then the Central Bank of Djibulistan increases the money supply. a. Assuming unexpected inflation as a result of the above-mentioned policy, explain any changes in output, unemployment, and inflation that are caused by the monetary expansion. Explain your answer and conclusions using three graphs: IS-LM, AD-AS, and the Phillips curve.  b. Assuming instead that resulting, inflation is expected, explain any changes in output, unemployment, and inflation that are caused by the monetary expansion. Explain your answer and conclusions using three graphs: ISLM, AD-AS, and the Phillips curve.

ET = 0.7 #-1 + 0.3 7-2 Okun's law for this economy is: (Y – Y-1)/Y-1 = 3.0 – 2.0 (u – u-1) The economy begins at its natural rate of unemployment with a stable inflation rate of 5 percent. a. What is the natural rate of unemployment for this economy? b. Graph the short-run tradeoff between infla- tion and unemployment that this economy faces. Label the point where the economy begins as point A. (Be sure to give numerical values for point A.) c. A fall in aggregate demand leads to a reces- sion, causing the unemployment rate to rise 4 percentage points above its natural rate. On your graph in part (a), label the point the economy experiences that year as point B. (Once again, be sure to give numerical values.)

do fast

(a) Assume the economy starts at full employment. Illustrate the short-run and long-run impact of an unexpected monetary contraction using the IS-LM model, the AD-AS model, and the Phillips curve. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; v. the short-run equilibrium values; and vi. the long-run equilibrium values. Explain in words what your graphs illustrate. ) (b) Assume that people form expectations rationally and that the sticky-price model describes the aggregate supply curve in the economy. For each of the following scenarios explain whether or not monetary policy can have real effects on the economy. i. The central bank determines monetary policy at the same time that firms are setting prices, so that both firms and policymakers have all of the same information. ) ii. The central bank determines monetary policy after firms have set prices using information not available at the time prices were set. )…