HomeworkLib
Question

6. The long-run effects of monetary policy Aa Aa The following graphs show an economy that is cur...


6. The long-run effects of monetary policy 


The following graphs show an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run (LR) and short-run (SR) Phillips curves. The point on each graph shows the economy's current position. 

image.png


According to the graphs, potential output in this economy is _______  and the natural rate of unemployment is _______ .


Suppose the central bank of the economy decreases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves

 Tool tip: On each graph, click and drag one or both of the curves. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just try again and drag it a little farther.


The long-run effect of the central bank's policy is _______ in the inflation rate, _______ in the unemployment rate, and _______   in real GDP.

business   economics   
11 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

1 0
Add a comment
Know the answer?
Add Answer to:
6. The long-run effects of monetary policy Aa Aa The following graphs show an economy that is cur...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • The following graphs show the state of an economy that is currently in long-run equilibrium.

    3. The long-run effects of monetary policy The following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC).Which of the following statements are true based on these graphs? Check all that apply The natural level of output is $3 trillion. The unemployment rate is currently 6% higher than the natural rate of unemployment. The...

  • Which of the following statements are true based on these graphs? Check all that apply.

    The following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC).ADLRAS0369121518PRICE LEVELOUTPUT (Trillions of dollars)AD   LRAS   SRPCLRPC024681012INFLATION RATEUNEMPLOYMENT RATE (Percent)SRPC   LRPC   Which of the following statements are true based on these graphs? Check all that apply.It is impossible to determine the natural rate of unemployment from these graphs alone.The natural rate of unemployment is 6%.The...

  • 7. Effects of an active or passive policy

    7. Effects of an active or passive policy The following graph shows the aggregate demand curve (AD), the short-run aggregate supply curve SRAS), and the long-run aggregate supply curve (LRAS) for a hypothetical economy. Suppose the economy is in short-run equilibrium. The _______ of $4 trillion drives unemployment _______ the unemployment rate consistent with full-employment output. Suppose public officials are concerned about the $4 trillion gap in the economy and the resulting lower-than-expected aggregate demand. The government has decided to follow an active...

  • Economics chart The following graph shows the economy in long-run equilibrium at the price level of...

    Economics chart The following graph shows the economy in long-run equilibrium at the price level of 120 and potential output of $300 billion. Suppose several foreign economies experience severe recessions, causing foreign purchases of domestic goods and services to decline sharply. Shift the short-run aggregate supply (AS) curve or the aggregate demand (AD) curve to show the short-run impact of the economic turmoil abroad. Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if...

  • The following graphs show the state of an economy that is currently in long-run equilibrium. The...

    The following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC).

  • 7. Understanding the Fisher effect Aa Aa The following graphs show the loanable funds market. The...

    7. Understanding the Fisher effect Aa Aa The following graphs show the loanable funds market. The upward-sloping orange line represents the supply of loanable funds, and the downward-sloping blue line represents the demand for loanable funds. For each of the following scenarios, use the graph to show how the market will react to the given change in the expected future inflation rate. The following graph shows the demand and supply curves for loanable funds when the expected future inflation rate...

  • 8. Short-run and long-run effects of a shift in demand Aa Aa Suppose that the chicken...

    8. Short-run and long-run effects of a shift in demand Aa Aa Suppose that the chicken industry is in long-run equilibrium at a price of $3 per pound of chicken and a quantity of 600 million pounds per year. Suppose the Surgeon General issues a report saying that eating chicken is good for your health. The Surgeon General's report will cause consumers to demand chicken at every price. In the short run, firms will respond by Shift the supply curve,...

  • 3. The short-run and long-run supply response to a change in the price level The following...

    3. The short-run and long-run supply response to a change in the price level The following graph represents the aggregate supply (AS) curve based on an expected price level of 150. The economy's potential GDP level is $9 trillion. Major unions across the country have recently negotiated three-year wage contracts with employers. The wage contracts are based on an expected price level of 150, but the actual price level turns out to be 200. Show the short-run effect of the...

  • • if the velocity of money is 2, the money supply in this economy is ($4.5 trillion/ $18 trillion/ $27 trillion/ $3...

    • if the velocity of money is 2, the money supply in this economy is ($4.5 trillion/ $18 trillion/ $27 trillion/ $36 trillion/ $45trillion /$54 trillion) •because ( the federal reserve controls M/ velocity is assumed to be constant/ the AD curve is downward sloping ), the percentage increase in the price level Is ( less then/ the same as/ greater then ) the percentage increase im the money supply. the illustrates the ( importance of the federal reserve /...

  • Which of the following factors will influence the position of the long-run aggregate supply curve? Check all that apply

    5. The slope and position of the long-run aggregate supply curve Which of the following factors will influence the position of the long-run aggregate supply curve? Check all that apply The price level The quantity of physical capital The amount of available natural resources The size of the labor force Suppose the economy produces real GDP of $30 bwwion when unemployment is at its natural rate. On the following graph, use the purple line (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve.  Suppose the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT