As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demandcaused by the housing and financial crises and a decrease in short-run aggregate supply caused byrising commodity prices.Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregatesupply and aggregate demand on the following graph. Then, on the subsequent graph, indicatewhat happens on a Phillips-curve diagram.LRASAggregate SupplyAggregate DemandXE0LRPCSRPCUnemployment RatePrice LevelInflation RateQuantity of OutputAggregate DemandEquilibrium output will rise.The effect on the inflation rate will be ambiguous.The price level will fall.Unemployment will rise.Aggregate SupplyLRASLong-Run EquilibriumSRPCLRPCLong-Run Equilibrium(?)Which of the following is true as a result of the two changes in aggregate demand and aggregatesupply? (Note: Do not consider the magnitudes of the shifts given on the preceding graphs. Thinkonly about the directions of the shifts.) Check all that apply.Suppose the Fed responds quickly to these shocks and adjusts monetary policy to keepunemployment and output at their natural rates.?On each of the previous graphs, adjust the curve or curves (if necessary) to show the long-runresults, and place a black point (plus symbol) on the point representing the new long-runequilibrium.True or False: In these situations, the Fed always takes the course of action you selected.TrueFalse

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As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising commodity prices. Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregate supply and aggregate demand on the following graph. Then, on the subsequent graph, indicate what happens on a Phillips-curve diagram. Price Level Inflation Rate LRAS Aggregate Supply LRPC Aggregate Demand Quantity of Output Unemployment Rate Aggregate Demand Aggregate Supply LRAS + Long-Run Equilibrium SRPC LRPC + Long-Run Equilibrium (? ?

As described in the chapter, the Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising commodity prices. Starting from a long-run equilibrium, illustrate the effects of these two changes on aggregate supply and aggregate demand on the following graph. Then, on the subsequent graph, indicate what happens on a Phillips-curve diagram. Price Level Inflation Rate LRAS Aggregate Supply LRPC Aggregate Demand Quantity of Output Unemployment Rate Aggregate Demand Aggregate Supply LRAS + Long-Run Equilibrium SRPC LRPC + Long-Run Equilibrium (? ?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter17: The Short-run Trade-off Between Inflation And Unemployment

Section: Chapter Questions

Problem 8PA

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