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The graph shows the short-run and long-run Phillips curves. The current inflation rate is 5 percent a year. Inflation rate (percent per year) 12.5 LRPC The Fed announces that it will increase the money growth rate so that the inflation rate will rise to 6 percent a year. 10.0- If no one believes the Fed and expected inflation remains at 5 percent a year, explain the effect of the Fed's action on inflation and unemployment next year. Choose the correct statement. 7.5- 5.0- O A. The inflation rate rises and the unemployment rate will increase in a movement up the long-run Phillips curve. SRPC O B. The unemployment rate will decrease but inflation will not change. 2.5- OC. Nothing will happen. It takes more than a year for unemployment and inflation to begin to respond to a speed up in money growth. 0.0- O D. The inflation rate rises and the unemployment rate decreases in a movement up the short-run Phillips curve. 10 Unemployment rate (percent of labor force)

The graph shows the short-run and long-run Phillips curves. The current inflation rate is 5 percent a year. Inflation rate (percent per year) 12.5 LRPC The Fed announces that it will increase the money growth rate so that the inflation rate will rise to 6 percent a year. 10.0- If no one believes the Fed and expected inflation remains at 5 percent a year, explain the effect of the Fed's action on inflation and unemployment next year. Choose the correct statement. 7.5- 5.0- O A. The inflation rate rises and the unemployment rate will increase in a movement up the long-run Phillips curve. SRPC O B. The unemployment rate will decrease but inflation will not change. 2.5- OC. Nothing will happen. It takes more than a year for unemployment and inflation to begin to respond to a speed up in money growth. 0.0- O D. The inflation rate rises and the unemployment rate decreases in a movement up the short-run Phillips curve. 10 Unemployment rate (percent of labor force)

Principles of Economics, 7th Edition (MindTap Course List)
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter35: The Short-Run Trade-off Between Inflation And Unemployment
Section: Chapter Questions
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SUDmit test The graph shows the short-run and long-run Phillips curves. The current inflation rate is 5 percent a year. Inflation rate (percent per year) 12.5- LRPC The Fed announces that it will increase the money growth rate so that the inflation rate will rise to 6 percent a year. 10.0- If no one believes the Fed and expected inflation remains at 5 percent a year, explain the effect of the Fed's action on inflation and unemployment next year. Choose the correct statement. 7.5- 5.0- O A. The inflation rate rises and the unemployment rate will increase in a movement up the long-run Phillips curve. SRPC O B. The unemployment rate will decrease but inflation will not change. 2.5- OC. Nothing will happen. It takes more than a year for unemployment and inflation to begin to respond to a speed up in money growth. 0.0- O D. The inflation rate rises and the unemployment rate decreases in a movement up the short-run Phillips curve. 10 Unemployment rate (percent of labor force) empts Next
Transcribed Image Text:SUDmit test The graph shows the short-run and long-run Phillips curves. The current inflation rate is 5 percent a year. Inflation rate (percent per year) 12.5- LRPC The Fed announces that it will increase the money growth rate so that the inflation rate will rise to 6 percent a year. 10.0- If no one believes the Fed and expected inflation remains at 5 percent a year, explain the effect of the Fed's action on inflation and unemployment next year. Choose the correct statement. 7.5- 5.0- O A. The inflation rate rises and the unemployment rate will increase in a movement up the long-run Phillips curve. SRPC O B. The unemployment rate will decrease but inflation will not change. 2.5- OC. Nothing will happen. It takes more than a year for unemployment and inflation to begin to respond to a speed up in money growth. 0.0- O D. The inflation rate rises and the unemployment rate decreases in a movement up the short-run Phillips curve. 10 Unemployment rate (percent of labor force) empts Next
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