Which one of the following statements isINCORRECT? The diagram aboveillustrates the... Select one: a. initialshort-run equilibrium is at point a, andsince the output gap is positive, inflationincreases. The central bank decided toincrease the interest rate in reaction to thishigh inflation, and over time there is anupward movement along the LM curve. b.short-run to the medium - run adjustmentprocess where output is above potentialoutput. c. short-run to the medium - runadjustment process where there is apositive output gap. d. initial short-runequilibrium is at point a, and since theoutput gap is positive, inflation increases.The central bank decided to increase theinterest rate in reaction to this highinflation, and over time there is an upwardmovement along the IS curve.Real interest rate, rChange in inflation rate(π-11-1)0ISbba₁8₁YnYPCLM₁LMYY

The Phillips curve suggests that there is an inverse relationship between inflation and…

Answered: Which one of the following statements…

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Which one of the following statements is INCORRECT? The diagram above illustrates the... Select one: a. initial

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter24: The Aggregate Demand/aggregate Supply Model

Section: Chapter Questions

Problem 3SCQ: The short run aggregate supply curve was constructed assuming that as the price of outputs...

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Question

Which one of the following statements is
INCORRECT? The diagram above
illustrates the... Select one: a. initial
short-run equilibrium is at point a, and
since the output gap is positive, inflation
increases. The central bank decided to
increase the interest rate in reaction to this
high inflation, and over time there is an
upward movement along the LM curve. b.
short-run to the medium - run adjustment
process where output is above potential
output. c. short-run to the medium - run
adjustment process where there is a
positive output gap. d. initial short-run
equilibrium is at point a, and since the
output gap is positive, inflation increases.
The central bank decided to increase the
interest rate in reaction to this high
inflation, and over time there is an upward
movement along the IS curve.
Real interest rate, r
Change in inflation rate
(π-11-1)
0
IS
b
b
a₁
8₁
Yn
Y
PC
LM₁
LM
Y
Y

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The economy begins in longcrun equilibrium. Thenone day, the president appoints a new chair of theFederal Reserve. 11\is new chainnan is well known forher view that inflation is not a major problcn1 for aneconomy.a. How would this news affect the price level thatpeople would expect to prevail?b. How would this change in the expected pricelevel affect the nonlinal wage that workers andfmn.s agree to in their new labor contracts?c. How would this change in the nonlinal wageaffect the profitability of producing goods andservia,s at any given price level?d. How docs this change in profitability affect theshort-run aggregate-supply curve?e. ff aggregate demand is held constant, how docsthis sllift in the aggregate-supply curve affect theprice level and the quantity of output produced?f. Do you think this Fed chainnan was a goodappointment?
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ASAP
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