Macroeconomics
21st Edition
ISBN: 9781259915673
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Question
Chapter 18, Problem 4DQ
To determine
Some similarities in the two cases: the distinctions between short run aggregate supply and long run aggregate supply and the distinction between the short run Phillips Curve and the long run Phillips Curve.
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Assume that the Phillips curve equation is represented by π = +0.1 - 2ut where π = 0-1. Suppose that
0 = 1 and the inflation rate is ₁ = 3% at t = 1. What is the actual rate of inflation for t = 3 if the government
maintains an unemployment rate of 3% each period?
O 11%
O 3%
O 15%
5%
O 7%
Refer to the figure A above.
Figure A
Figure B
Price
Price
P3
P2
`D,
P,
D2
Q,
Quantity
Q, Q2 Q,
Quantity
Assuming this market is representative of the economy as a whole, a negative
demand shock will:
1) increase both the price level and the quantity of output produced.
2) increase output, but leave prices unchanged.
O 3) lower the price level, but leave output unchanged.
4) raise the price level, but leave output unchanged.
d. A decrease in aggregate demand.
e. An increase in aggregate demand that
exceeds an increase in aggrega
supply.
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