Question

1. When the Federal Reserve increases the money supply and expands aggregate demand, it moves the economy along the short-run Phillips curve to a point with higher inflation and lower unemployment
2. If the Federal Reserve increases the rate of money growth and maintains it at the new higher rate, eventually expected inflation will increase, and the short-run Phillips curve will shift upward
3. When an adverse supply shock shifts to the short-run aggregate supply curve to the left, it also shifts the short-run Phillips curve to the right, which cause inflation and also unemployment fall
4. In the long-run, regardless of the monetary policy pursued by the central bank, output is at its natural level and unemployment is at its natural rate
5. A change in aggregate demand and aggregate supply caused by change in monetary and fiscal policy can lead to long-run fluctuation in production and unemployment

True or False and explain why!

Answer 1

Answers

a) True,

An expansion in the cash flexibly by the Federal Reserve will expand the cash held by the individuals. It will extend total interest in the market which prompts an expansion in work. More specialists will in general increment the costs and expansion too.

b) True,

  An expansion in the pace of cash development will build the swelling which will in general increment the normal expansion sooner rather than later because of which the Phillips bend will move upward.

c) True,

  Unfriendly gracefully stun that is a lessening in the flexibly of products and enterprises prompts an expansion in the costs and further swelling. In this way, high swelling and high joblessness would move the short-run Phillips bend to one side.

d) True,

Despite the money related approach sought after by the national bank yield and joblessness is over the long haul at their characteristic rates.

e) True,

  The Phillips bend shows the backward exchange between paces of expansion and paces of joblessness. In the event that joblessness is high, swelling will be low; if joblessness is low, the expansion will be high. The Phillips bend and total interest share comparable segments. The Phillips bend is the connection between swelling, which influences the value level part of total interest, and joblessness, which is reliant on the genuine yield bit of total interest. Thus, it isn't outlandish to state that the Phillips bend and total interest are entirely related.

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