3 6 12 UNEMPLOYMENT RATE (Percent) 9 15 18 ollowing statements are true based on these graphs? Check all that apply. natural level of output is $3 trillion. unemployment rate is currently 9% higher than the natural rate of unemployment. current quantity of output is greater than potential output. central bank of the economy decreases the money supply.
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- The following graphs show the state of an economy that is currently in Tong-run equilibrium. The first graph shows the aggregate demănd (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phìllips curves (LRPC and SRPC). LRAS AD LRAS AD 12 15 18 OUTPUT (Trillions af dollars) LRPC SRPC LRPC SRPC 10 12 UNEMPLOYMENT RATE (Percent) Which of the following statements are true based on these graphs? Check all that apply. - The current quantity of output is greater than potential output. The natural level of output is $9 trillion. - The unemployment rate is currently 6% higher than the natural rate of unemployment. Suppose the central bank of the economy increases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. in the The long-run effect of the central bank's policy is inflation rate, real GDP. in the unemployment rate, and in INFLATION RATEThe 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)Assume that a country's economy is in equilibrium. a) () Using a correctly labeled AD/AS graph, show how an increase in the price of gasoline, an important input of production, will affect the following in the short run. (i) Real output :- (ii) Price level-Using a correctly labeled graph, show the same effect on the Phillips curve. () Central bank of the country responds to the higher price of oil by increasing the money supply. (i ) ()Explain the process by which the increase in the money supply will affect the aggregate demand in the short run. (ii) (Indicate on the AD/AS graph, how the increase in the money supply will affect real output and the price level. d) () Now assume that instead of using monetary policy in response to the gasoline price increase, the government reduces business taxes, which results in lower production costs. Using a new correctly labeled graph, show the effect of the reduction in business taxes on the following. (i) () Real output - (ii) () Price levele) (…
- 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 graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate-demand (AD) and long-run aggregate-supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC). PRICE LEVEL INFLATION RATE 0 0 3 1 LRAS 6 12 9 OUTPUT (Trillions of dollars) LRPC 4 UNEMPLOYMENT (Percent) 2 3 15 5 AD SRPC 18 6 AD LRAS SRPC LRPCThe 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, 2 1 1 2 3 4 7 8 UNEMPLOYMENT RATE (Percent) INFLATION RATE (Percent)
- 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…The 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…As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising commodity prices. Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregate supply and aggregate demand on the following graph. Then, on the subsequent graph, indicate what happens on a Phillips-curve diagram. LRAS Aggregate Supply Aggregate Demand XE 0 LRPC SRPC Unemployment Rate Price Level Inflation Rate Quantity of Output Aggregate Demand Equilibrium output will rise. The effect on the inflation rate will be ambiguous. The price level will fall. Unemployment will rise. Aggregate Supply LRAS Long-Run Equilibrium SRPC LRPC Long-Run Equilibrium (?) Which of the following is true as a result of the two changes in aggregate demand and aggregate supply? (Note: Do not consider the magnitudes of the shifts given on the preceding graphs. Think only about the…
- 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 graphs plot the long-run equilibrium situation for an economy. The first graph plots the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second graph plots the long-run and short-run Phillips curves (LRPC and SRPC, respectively). PRICE LEVEL O LRAS 2 3 OUTPUT (Trilions of dollars) AD AD 10 LRASThe 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.