Asked by theeba tharshini on May 11, 2024
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According to the long-run Phillips curve, if the Fed increases the growth rate of the money supply, what happens to the inflation rate and the unemployment rate in the long run?
Long-Run Phillips Curve
A visual representation showing the relationship between inflation and unemployment rates, suggesting that in the long run, there is no trade-off between inflation and unemployment.
Money Supply
The sum total of financial assets available in an economy at a certain point in time.
Inflation Rate
The percentage rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling over a specific period.
- Understand the interrelationship among rising money supply, inflation, and the unemployment rate over the long run.
- Digest the concept of the Phillips curve through the lens of short-run and long-run analysis.
- Familiarize oneself with the ramifications of fiscal and monetary policies on inflation and unemployment trends.
Verified Answer
Learning Objectives
- Understand the interrelationship among rising money supply, inflation, and the unemployment rate over the long run.
- Digest the concept of the Phillips curve through the lens of short-run and long-run analysis.
- Familiarize oneself with the ramifications of fiscal and monetary policies on inflation and unemployment trends.
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