AP Macroeconomics 5.2: Phillips Curve Shocks

Explain how demand and supply shocks move the Phillips curves and change inflation and unemployment in the short run and long run.

[Maximum number: 1]

Assume that the economy of Barrikos is in short-run equilibrium, with its economic data

summarized in the table provided. The government budget is balanced, and the capital and

financial account (CFA) balance is zero.

Assume that the fiscal policy action identified in part C is implemented.

Assume there is no change in inflationary expectations. On your graph in part B, show

a possible new short-run equilibrium point, labeled Z, that would result from the fiscal

policy action identified in part C.

(ii)	On the graph from part B, show a point labeled Z on the SRPC to the left of point X. Point 6	1 point
	Inflation Rate (%)

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MOD-3.B—Explain (using graphs as appropriate) the response of unemployment and inflation in the short run and in the long run question 1