IS-MP & Phillips Curvela. Draw an economy in long-run equilibrium when the real interest rate is 3.5% using the IS-MP model as a function of theoutput gap. On the graph below, show the Phillips Curve as a function of the unemployment rate if the natural rate offunemployment is 4.6%. Label the initial equilibrium point A.b. Now show the effect of an increase in investment in the IS-MP and the Phillips Curve. Label this new equilibrium point B.IS-MPPhillips Curve (as a function of Unemployment)

IS curve shows the relationship between the interest rate and output level when good market is in…

IS-MP & Phillips Curve a. Draw an economy in long-run equilibrium when the real interest rate is 3.5% using the IS-MP model as a function of the output gap. On the graph below, show the Phillips Curve as a function of the unemployment rate if the natural rate of unemployment is 4.6%. Label the initial equilibrium point A. b. Now show the effect of an increase in investment in the IS-MP and the Phillips Curve. Label this new equilibrium point B. IS-MP

IS-MP & Phillips Curve a. Draw an economy in long-run equilibrium when the real interest rate is 3.5% using the IS-MP model as a function of the output gap. On the graph below, show the Phillips Curve as a function of the unemployment rate if the natural rate of unemployment is 4.6%. Label the initial equilibrium point A. b. Now show the effect of an increase in investment in the IS-MP and the Phillips Curve. Label this new equilibrium point B. IS-MP

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter25: The Keynesian Perspective

Section: Chapter Questions

Problem 14RQ: Would you expect to see long-run data trace out a stable downward-sloping Phillips curve?

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