4. Monetary policy and the Phillips curveThe following graph shows the current short-run Phillips curve for a hypothetical economy; the point on the graph shows the initial unemployment rateand 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 thispolicy.Hint: You may assume that the central bank's move was unanticipated.INFLATION RATE (Percent)853N10039SR Phillips Curve812UNEMPLOYMENT RATE (Percent)1518In the short run, an unexpected decrease in the money supply results inunemployment rate.SR Phillips Curvein the inflation rate andin the On the following graph, shift the long-run (LR) Phillips curve or drag the blue point along the curve, or do both, to show the long-run effects of thedecrease in the money supply.INFLATION RATE (Percent)CO651003LR Phillips Curve9812UNEMPLOYMENT RATE (Percent)15In the long run, the decrease in the money supply results in(relative to the economy's initial equilibrium).18LR Phillips Curve?in the inflation rate andin the unemployment rate

Phillips curve : It can be defined as a form of graphical of the concept of economics which shows…

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) 10 10 N 0 0 I I 3 O SR Phillips Curve 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

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) 10 10 N 0 0 I I 3 O SR Phillips Curve 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

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: The Short-run Trade-off Between Inflation And Unemployment

Section: Chapter Questions

Problem 4PA

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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 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. 6 SR Phillips Curve SR Phillips Curve 1 4. 6. 8 10 12 UNEMPLOYMENT RATE (Percent) 4. 2) INFLATION RATE (Percent)
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 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. INFLATION RATE (Percent) 6 5 N 1 0 0 SR Phillips Curve + 4 2 3 UNEMPLOYMENT RATE (Percent) 1 5 SR Phillips Curve In the short run, an unexpected increase in the money supply results in the unemployment rate. (?) in the inflation rate and in
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 ra and inflation rate. 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. INFLATION RATE (Percent) 0 INFLATION RATE (Percent) 3 N D SR Philips Curve In the short run, an unexpected increase in the money supply results in unemployment rate. 12 UNEMPLOYMENT RATE (Parcent) On the following graph, shift the curve or drag the blue point along the supply. 3 15 12 UNEMPLOYMENT RATE (Percent) 15 15 In the long run, the increase in the money supply results in (relative to the economy's initial equilibrium).…
4. Monetary policy and the Phillips curve the following o 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, c do both, to show the short-run effects of this policy. Hint: You may assume that the central bank's move was unanticipated. unemployment rate. In the short run, an unexpected increase in the money supply results in in the inflation rate and in the 2 UNEMPLOYMENT RATE (Percent) a hypothetical economy. The given point on the graph indicates the initial rates of Assume that the economy is currently in long-run equilibrium. 3 6 0 INFLATION RATE (Percent) SR Pips Curve . SR Phillips Curve
8. 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. INFLATION RATE (Percent) 5 2 SR Phillips Curve 9 6 12 UNEMPLOYMENT RATE (Percent) 15 18 SR Phillips Curve ?
29) An inflation rate targeting rule A) reduces uncertainty about monetary policy. means that the inflation rate must exceed 5 percent in order for the rule to be effective. nas been adopted the by the Fed in response to the financial crisis of 2008-2009. D) will not work if the Fed continues to sue open market operations. 30) "As the Fed Chases Inflation, Critics Shout, 'Faster!" "For weeks, the Fed has broadcast its intention to raise interest rates glacially." The Fed was moving slowly, according to an economist because "..the declining price of oil, economic fundamentals, including productivity and global competition, will keep inflation in check." The Fed, recognizing that the economy was improving stated it planned to "respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability." Other economists disagree with the Fed's restrained policy as a "mistake." www.nytimes, 7/1/2004 Economists estimate that if the Fed's policy was enacted in…
8. 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 decrease 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. INFLATION RATE (Percent) 5 2 INFLATION RATE (Percent) 1 0 6 5 0 1 0 3 In the short run, an unexpected decrease in the money supply results in unemployment rate. 0 9 6 12 UNEMPLOYMENT RATE (Percent) 3 SR Phillips Curve 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 decrease in the money supply. O 6 UNEMPLOYMENT RATE (Percent) 9 15 12 18 15 In…
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…
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 increase the money supply. 1. 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. (Please use the image attached) 2. In the long run, the increase in the money supply results in a decrease? an increase? no change? in the inflation rate and a decrease? an increase? no change? in the unemployment rate (relative to the economy's initial equilibrium).
3. The long-run effects of monetary policy 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 (URAS) curves. The second graph plots the long-run and short-run Phillips curves (LRPC and SRPC, respectively). (?) PRICE LEVEL INFLATION RATE 0 2 3 4 OUTPUT (Trofdara) 9 UNEMPLOYMENT HATE (P) AD SHPC AD - The long-run effect of the central bank's policy is in real GDP LHAS SHPC LAPC (?) Which of the following statements are true based on these graphs? Check all that apply. The natural level of output is $6 trillion. The current quantity of output is greater than potential output. The unemployment rate is currently 9% higher than the natural rate of unemployment. Suppose the central bank of the economy pursues a policy that increases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. in the inflation rate, in the unemployment…
4. Monetary policy and the Phillips curve NOTE: MAKE SURE TO ADJUST BOTH GRAPHS PROPERLY!! and make sure its clear!! NOTE: options for first set of blanks 1. In the short run, an unexpected decrease in the money supply results in _____ (no change OR a decrease OR an increase) in the inflation rate and ______ (no change OR a decrease OR an increase NOTE: options for first set of blanks 2. In the short run, an unexpected decrease in the money supply results in _____ (no change OR a decrease OR an increase) in the unemployment rate (relative to the economy's initial equilibrium).
1. 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.