Question
a. For each of the following changes, which equilibrium curve (IS, LM, or FE) is shifted? Draw the change in the underlying demand or supply
a. For each of the following changes, which equilibrium curve (IS, LM, or FE) is shifted? Draw the change in the underlying demand or supply curves (for example, money demand and supply for the LM curve) and show how the equilibrium changes.
i. Expected inflation increases.
ii. The future marginal productivity of capital increases.
iii. Labor supply decreases.
iv. Future income declines.
v. There's a temporary beneficial supply shock.
vi. The nominal interest rate on money rises
b. Based on the 'early incarnation' of the Phillips curve, explain what effect an increase in the unemployment rate will have on the inflation rate.
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