Question
show both answers with proper explanation/calculations and proper graphs thank you 52. Graphically demonstrate the effect of each of the following on either the short-run
show both answers with proper explanation/calculations and proper graphs
thank you
52. Graphically demonstrate the effect of each of the following on either the short-run aggregate supply (SAS) curve or the long-run aggregate supply (LAS) curve. Be sure to label all axes.
a. Businesses find that they are unable to produce more output without having to pay more wages or increasing their costs of capital.
b. Productivity rises by 3% and input prices rise by 5%.
c. A forest fire destroys a significant portion of Canada.
d. The country's currency depreciates dramatically.
e. Productivity rises by 3% and wages rise by 3%.
54. Suppose the economy is operating below potential output. Inflation is 2% and expected inflation is 3%. The unemployment rate is 8% and the natural unemployment rate is 4%.
a. Draw a long-run Phillips curve and a short-run Phillips curve consistent with these conditions.
b. The government implements expansionary monetary policy. As a result, unemployment decreases to 6% and inflation increases to 2.5%. Expectations however, do not change. Show where the economy is on the graph you drew for (a) above. What happens to the long-run Phillips curve?
c. Expectations now fully adjust. Show this on the graph in (a) above. What happens to the short-run Phillips curve?
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