26 Jul WHICH OF THE FOLLOWING IS TRUE ALONG THE ENTIRE SRPC1?
The following graph shows an economy in long run equilibrium at point A. The vertical line is the lo Show more The following graph shows an economy in long run equilibrium at point A. The vertical line is the long run Phillips curve. The downward sloping curve labeled SRPC1 is the short run Phillips curve passing through point A. 1. Which of the following is true along the entire SRPC1? A. The actual inflation rate is 4%. B. The natural rate of unemployment is 3% C. The actual unemployment rate is 5%. D. The expected inflation rate is 4%. 2. Suppose the federal reserve suddenly and unexpectedly decreases the money supply in an effort to reduce inflation. As a result of this unanticipated action actual inflation falls to 3%. On the graph use the black point (X symbol labeled B) to illustrate the short run effects of this policy. 3. Now suppose that after a period of 3% inflation households and firms begin to expect that the inflation rate will continue to be 3%. On the graph use the red line (cross symbols) to draw SRPC2 the short run Phillips curve that is consistent with these expectations assuming that it is parallel to SRPC1. 4. Finally using the purple point (diamond symbol labeled C) indicate the new long run equilibrium for this economy on the graph. The inflation rate at point C is ______(lower than/higher than/the same as) the inflation rate at point A and the unemployment rate at point C is ______(the same as/higher than/lower than) the unemployment rate at point A. 5. Was the Fed able to achieve its goal of lowering inflation? A. No because the federal reserve cannot affect the inflation rate through monetary policy. B. Yes but only in the short run; in the long run inflation returned to its natural rate. C. Yes; the Feds policy successfully reduced inflation in both the short and the long run. 6. Now suppose that the public fully anticipates the Feds decision to decrease the money supply. Assume the public also believes that the Fed is firmly committed to carrying out this policy. If the public has rational expectations when the economy is in long run equilibrium a fully anticipated decrease in the money supply will cause the economy to move _______ A. From A to B then to C B. From A to B then back to A C. From A to B permanently D. Directly from A to C E. From A to B to C then back to B On the Phillips curve diagram. In this case the fully anticipated decrease in the money supply will have the immediate effect of _____(no change/a decrease/an increase) in the inflation rate and _____(an increase/a decrease/no change) in the unemployment rate. Show less
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.