Assume that an economy is initially at the natural rate of unemployment. a. Use a Phillips curve diagram to illustrate graphically how the inflation rate and unemployment rate change both in the short run and in the long run to an unexpected expansionary monetary policy. b. Use a Phillips curve diagram to illustrate graphically how the inflation rate and unemployment rate change both in the short run and in the long run to the announcement of a credible plan of expansionary monetary policy when people have rational expectations.
Assume that an economy is initially at the natural rate of unemployment. a. Use a Phillips curve diagram to illustrate graphically how the inflation rate and unemployment rate change both in the short run and in the long run to an unexpected expansionary monetary policy. b. Use a Phillips curve diagram to illustrate graphically how the inflation rate and unemployment rate change both in the short run and in the long run to the announcement of a credible plan of expansionary monetary policy when people have rational expectations.
Chapter27: Issues In Macroeconomic Theory And Policy
Section: Chapter Questions
Problem 6P
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Assume that an economy is initially at the natural rate of unemployment.
a. Use a
unemployment rate change both in the short run and in the long run to an
unexpected expansionary
b. Use a Phillips curve diagram to illustrate graphically how the inflation rate and
unemployment rate change both in the short run and in the long run to the
announcement of a credible plan of expansionary monetary policy when
people have rational expectations.
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