Author Question: What action should the Fed take if it wants to move from a point on the short-run Phillips curve ... (Read 36 times)

Beheh · **on:** Jun 29, 2018

What action should the Fed take if it wants to move from a point on the short-run Phillips curve representing low unemployment and high inflation to a point representing higher unemployment and lower inflation?

What will be an ideal response?

Question 2

If technological change occurs in the economy

A) we will move up along the long-run aggregate supply curve.
B) we will move down along the long-run aggregate supply curve.
C) the long-run aggregate supply curve will shift to the right.
D) the long-run aggregate supply curve will shift to the left.

sierrahalpin · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The Fed would undertake a contractionary monetary policy. This would decrease aggregate demand, causing real GDP and the price level to both decrease. A decrease in real GDP will decrease employment, raising the unemployment rate.

Answer to Question 2

C