Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 31, Problem 7IAPA
To determine
To explain:
The way in which
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1. The inflation-unemployment relationship
The following graph shows the combinations of unemployment and inflation that existed in the United States for selected years between 1961 and
1969.
Click on any blue point (circle symbol) on the graph to get its exact coordinates. You can also use the black point (cross symbol) to find the
coordinates of other points along the curve. (Note: You will not be graded for any adjustments made to the graph.)
NFLATION RATE (Percent)
5.0
4.5
4.0
3.5
3.0
2.5
20
1.5
1.0
0.5
0
3.0
3.5
1969
1968
1967
1965
4.0
1964
4.5
6.0
UNEMPLOYMENT RATE (Percent)
5.0
5.5
1963
6.5
1961
7.0
?
When the United States economy goes through a period of extended growth, the economy is said to be heating up! Unemployment is low and companies are increasing workers’ wages above the national minimum wage. The Federal Reserve (FED) is concerned that these wage increases will result in inflation; higher prices throughout the economy. What can the FED do?
Inflation started to creep up in the late 1960's. By 1968, inflation was about 4%, and by 1973, inflation was about 6%. By 1980, inflation was at 13.5%. The Fed, led by Chairman Paul Volcker, engineered a recession that eventually disinflated the economy. Using the economic the concepts learned in class, especially the economics fluctuations model, explain how the Fed disinflates the economy from 13.5% to 3.5%, and what the effects of that disinflation are in the SR and the LR. You cannot draw graphs here, so you will need to explain the model and the shifts in words. Be thorough.
(The answer should contains 200 words)
Chapter 31 Solutions
Foundations of Economics (8th Edition)
Ch. 31 - Prob. 1SPPACh. 31 - Prob. 2SPPACh. 31 - Prob. 3SPPACh. 31 - Prob. 4SPPACh. 31 - Prob. 5SPPACh. 31 - Prob. 6SPPACh. 31 - Prob. 7SPPACh. 31 - Prob. 8SPPACh. 31 - Prob. 9SPPACh. 31 - Prob. 10SPPA
Ch. 31 - Prob. 11SPPACh. 31 - Prob. 1IAPACh. 31 - Prob. 2IAPACh. 31 - Prob. 3IAPACh. 31 - Prob. 4IAPACh. 31 - Prob. 5IAPACh. 31 - Prob. 6IAPACh. 31 - Prob. 7IAPACh. 31 - Prob. 8IAPACh. 31 - Prob. 9IAPACh. 31 - Prob. 10IAPACh. 31 - Prob. 1MCQCh. 31 - Prob. 2MCQCh. 31 - Prob. 3MCQCh. 31 - Prob. 4MCQCh. 31 - Prob. 5MCQCh. 31 - Prob. 6MCQ
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