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PhillipsCurveQuestions

PhillipsCurveQuestions - PhillipsCurveQues.ons Problem1...

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Phillips Curve Ques.ons
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Problem 1 The short‐run Phillips curve shows the combina.ons of A. unemployment and infla.on that arise in the short run as aggregate demand shiAs the economy along the short‐run aggregate supply curve. B. unemployment and infla.on that arise in the short run as short‐run aggregate supply shiAs the economy along the aggregate demand curve. C. real GDP and the price level that arise in the short run as short‐run aggregate supply shiAs the economy along the aggregate demand curve. D. None of the above is correct.
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Problem 1.1 Suppose that the Fed unexpectedly pursues contrac.onary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Jus.fy your answer using the Phillips curves.
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Problem 2 Suppose the natural rate of unemployment is 6 percent. On one graph, draw two Phillips curves that describe the four situa.ons listed here. Label the point that shows the posi.on of the economy in each case.
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