Discuss the relationship between the aggregate supply curve and the short-run Phillips curve
What will be an ideal response?
The short-run Phillips curve and the aggregate supply curve arise because the money wage rate does not change in the short run. When the price level increases, the inflation rate is positive. And when the price level increases, the money wage rate does not change, so the real wage rate declines. As a result of the lower real wage rate, the quantity of labor employed increases so that the quantity of real GDP increases and the unemployment rate decreases. Therefore the higher price level is associated with an increase in real GDP and a higher inflation rate is associated with a decrease in unemployment.
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Which of the following variables is likely to serve as an intermediate target for monetary policy?
A) Money supply B) Inflation rate C) Open-market operations D) Unemployment rate
Which of the following is true about the market equilibrium? a. As the price increases, the quantity demanded and the quantity supplied increases. b. As the price increases, the quantity demanded and the quantity supplied decreases. c. As the price increases, the quantity demanded increases and the quantity supplied decreases
d. As the price increases, the quantity demanded decreases and the quantity supplied increases. e. As the price increases, neither the quantity demanded nor quantity supplied change.