In: Economics
ESSAY
1. Draw the Phillips curve. Use the model of aggregate demand and aggregate supply to show how policy can move the economy from a point on this curve with high inflation to a point with low inflation.
2. Does inflation and unemployment would be related in the long run? Give your explanation and draw the graph.
3. Suppose there is a tornado in western Oklahoma, causing a supply shock for wheat. What will happen in aggregate demand and aggergate supply curve for wheat? How will it affect the Phillips curve? Explain it with graph!
4. How does expected inflation shifts the short-run Phillips curve? Draw the graph to explain!
5. Show the effect of disinflationary monetary policy in the short-run and long-run Phillips curve by drawing the graph!