Suppose the economy is initially at a long-run equilibrium. The Fed then increases the money supply. In the following three diagrams, assume the resulting inflation is unexpected. c. Shift the appropriate curve to show the long-run adjustment. Then place the points for short-run equilibrium and long-runequilibrium in their appropriate places.Inflation Rate,Phillips CurveLRPCUnemployment Rate, uSRPCLong-run equilibriumShort-run equilibrium

In this case, we have to discuss about Phillips curve. This Philips curve indicates a strong…

Answered: c. Shift the appropriate curve to show…

Principles of Macroeconomics (MindTap Course List)

7th Edition

ISBN:9781285165912

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: The Short-Run Trade-off Between Inflation And Unemployment

Section: Chapter Questions

Problem 3QCMC

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Suppose the economy is initially at a long-run equilibrium. The Fed then increases the money supply. In the following three diagrams, assume the resulting inflation is unexpected.

c. Shift the appropriate curve to show the long-run adjustment. Then place the points for short-run equilibrium and long-run
equilibrium in their appropriate places.
Inflation Rate,
Phillips Curve
LRPC
Unemployment Rate, u
SRPC
Long-run equilibrium
Short-run equilibrium

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