Changes in short run and long run Phillips curve .

Question

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

Answer 1

Question

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

Chapter 17, 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

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?

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…

Answer 2

Question

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

Chapter 17, 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.

Expert Solution & Answer

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Check out sample textbook solution

Answer 3

Question

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

Chapter 17, 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.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Answer 4

Question

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

Chapter 17, Problem 2PA

Sub part (a):

To determine