INFLATION RATE 0 3 LRPC 6 12 UNEMPLOYMENT RATE (Percent) 15 SRPC 18 · The long-run effect of the central bank's policy is in real GDP. SRPC LRPC Which of the following statements are true based on these graphs? Check all that apply. The natural rate of unemployment is 9%. The natural level of output is 9%. It is impossible to determine the natural rate of unemployment from these graphs alone. Suppose the central bank of the economy pursues a policy that increases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. in the inflation rate, in the unemployment rate, and
INFLATION RATE 0 3 LRPC 6 12 UNEMPLOYMENT RATE (Percent) 15 SRPC 18 · The long-run effect of the central bank's policy is in real GDP. SRPC LRPC Which of the following statements are true based on these graphs? Check all that apply. The natural rate of unemployment is 9%. The natural level of output is 9%. It is impossible to determine the natural rate of unemployment from these graphs alone. Suppose the central bank of the economy pursues a policy that increases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. in the inflation rate, in the unemployment rate, and
Chapter10: Aggregate Supply
Section: Chapter Questions
Problem 1.1P
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Transcribed Image Text:INFLATION RATE
0
3
LRPC
6
12
UNEMPLOYMENT RATE (Percent)
9
15
SRPC
18
SRPC
The long-run effect of the central bank's policy is
in real GDP.
LRPC
?
Which of the following statements are true based on these graphs? Check all that apply.
The natural rate of unemployment is 9%.
The natural level of output is 9%.
It is impossible to determine the natural rate of unemployment from these graphs alone.
Suppose the central bank of the economy pursues a policy that increases the money supply.
Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves.
in the inflation rate,
in the unemployment rate, and
Transcribed Image Text:3. The long-run effects of monetary policy
The following graphs plot the long-run equilibrium situation for an economy. The first graph plots the aggregate demand (AD) and long-run aggregate
supply (LRAS) curves. The second graph plots the long-run and short-run Phillips curves (LRPC and SRPC, respectively).
PRICE LEVEL
0
2
LRAS
6
8
OUTPUT (Trillions of dollars)
10
AD
12
AD
LRAS
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