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(Solved): Not to long of an answer straight to the point please. Draw an AD-AS graph that shows the economy in ...
Not to long of an answer straight to the point please.
Draw an AD-AS graph that shows the economy in long-run equilibrium. (You should have a LRAS curve this time.) a. Suppose that the government decides to spend more money. Show the SHORT RUN effect on the economy on the AS-AD graph, and draw the Phillips Curve based on your graph (on a separate graph). b. Briefly explain what the Phillips Curve tells you about the short-run relationship between unemployment and inflation. c. Why is the long-run Phillips Curve vertical? Explain. (Hint: You might want to refer to what would happen NEXT in the graph that you drew in (a)
Expert Answer
Here the Aggregate equilibrium is equal to Aggregate demand. a) An increase in government spending increases the demand in the market which in the short run is not compl