If expectations are adaptive, how will the economy adjust to a new long-run equilibrium in response to expansionary monetary policy? Support your answer with a graph of the Phillips curve

What will be an ideal response?


Expansionary monetary policy increases the inflation rate. With adaptive expectations, workers and firms will underestimate inflation, resulting in a decrease in the real wage and a decrease in the unemployment rate (move from A to B on the short-run Phillips curve below). Eventually, workers and firms will adjust to the fact that inflation is higher, shifting the short-run Phillips curve up and increasing the unemployment rate to its natural rate (move from B to C in the graph below).

Economics

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In a sealed-bid, second-price auction, you should bid

A) your estimate of what others value the good at. B) one dollar more than your estimate of what the second-highest bid will be. C) your highest value. D) the common value of the good.

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Indicate whether the statement is true or false

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