You can click on the following link to download the problem set for this module: Policy Applications Problem Set.
Policy Applications Problem Set[1]
Use the following graph to answer questions 1 through 8 below:
- What is Curve 1?
- short-run Phillips curve.
- long-run aggregate supply curve.
- short-run aggregate supply curve.
- long-run Phillips curve.
- What is Curve 2?
- short-run Phillips curve.
- long-run aggregate supply curve.
- short-run aggregate supply curve.
- long-run Phillips curve.
- What is the unemployment rate at point B?
- 0
- 6
- 4
- 8
- What is the inflation rate at point B?
- 3
- 0
- 5
- If the economy starts at B and the money supply growth rate increases, then in the short run the economy moves to
- C
- D
- A
- Suppose the economy starts at B and the money supply growth rate increases. As a result, in the short run the inflation rate will
- decrease.
- remain the same.
- increase.
- Suppose the economy starts at B and the money supply growth rate increases. As a result, in the short run, the unemployment rate will
- decrease.
- remain the same.
- increase.
- If the economy starts at B and the money supply growth rate increases, in the long run the economy
- moves to C.
- moves to D.
- stays at B.
Use the following graph to answer questions 9 through 11 below.
This graph shows the AD-AS diagram for Mexico:
- What type of the GDP gap is observed in Mexico?
- The economy is facing an inflationary gap.
- There is no recessionary or inflationary gap.
- The Economy is facing a recessionary gap.
- What type of fiscal policy should the government of Mexico be implementing to bring the economy to the long-run equilibrium?
- The government should implement contractionary fiscal policy.
- There is no need for either contractionary or expansionary fiscal policy.
- The government should implement expansionary fiscal policy.
- What type of fiscal policy should the government of Mexico implement to bring the economy to the long-run equilibrium?
- The FED should implement contractionary monetary policy.
- There is no need for either contractionary or expansionary monetary policy.
- The FED should be implementing expansionary monetary policy.
[1] This assignment by Lumen Learning is licensed under a Creative Commons Attribution 4.0 International License. You can access an alternative means to plotting points at https://www.desmos.com/calculator.