The following graph shows the current short-run Phillips curve for a hypothetical economy; the point on the graph shows the initial unemployment rate and inflation rate. Assume that the economy is currently in long-run equilibrium.   Suppose the central bank of the hypothetical economy decides to decrease the money supply. On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the short-run effects of this policy. Hint: You may assume that the central bank's move was unanticipated.   SR Phillips Curve0246810126543210INFLATION RATE (Percent)UNEMPLOYMENT RATE (Percent)SR Phillips Curve      In the short run, an unexpected decrease in the money supply results in    in the inflation rate and    in the unemployment rate.   On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the decrease in the money supply.   0246810126543210INFLATION RATE (Percent)UNEMPLOYMENT RATE (Percent)      In the long run, the decrease in the money supply results in    in the inflation rate and    in the unemployment rate (relative to the economy's initial equilibrium).

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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The following graph shows the current short-run Phillips curve for a hypothetical economy; the point on the graph shows the initial unemployment rate and inflation rate. Assume that the economy is currently in long-run equilibrium.
 
Suppose the central bank of the hypothetical economy decides to decrease the money supply.
On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the short-run effects of this policy.
Hint: You may assume that the central bank's move was unanticipated.
 
SR Phillips Curve0246810126543210INFLATION RATE (Percent)UNEMPLOYMENT RATE (Percent)SR Phillips Curve   
 
In the short run, an unexpected decrease in the money supply results in    in the inflation rate and    in the unemployment rate.
 
On the following graph, shift the curve or drag the blue point along the curve, or do both, to show the long-run effects of the decrease in the money supply.
 
0246810126543210INFLATION RATE (Percent)UNEMPLOYMENT RATE (Percent)   
 
In the long run, the decrease in the money supply results in    in the inflation rate and    in the unemployment rate (relative to the economy's initial equilibrium).
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