Evaluate why the inflation-unemployment trade-off disappears in the long run.
3 SLIDES: Evaluate why the inflation-unemployment trade-off disappears in the long run.
Purpose of Assignment
Students will example the model economists use to analyze the economy’s short-run fluctuations–the model of aggregate demand and aggregate supply. Students will learn about some of the sources for shifts in the aggregate-demand curve and the aggregate-supply curve and how these shifts can cause fluctuations in output. Students will be introduced to actions policymakers might undertake to offset such fluctuations. Students will see why there is a temporary trade-off between inflation and unemployment, and why there is no permanent trade-off.
Assignment Steps
Resources: National Bureau of Economic Research
Select an organization your team is familiar with or an organization where a team member currently works.
Create a 15- to 20-slide Microsoft® PowerPoint® presentation to present to the organization’s Executive Committee.
Include the following items:
- Identify the three key facts about short-run economic fluctuations and how the economy in the short run differs from the economy in the long run.
- Explain economic fluctuations and how shifts in either aggregate demand or aggregate supply can cause booms and recessions using the model of aggregate demand and aggregate supply.
- Explain how monetary policy affects interest rates and aggregate demand.
- Analyze how fiscal policy affects interest rates and aggregate demand.
- Evaluate why policymakers face a short-run trade-off between inflation and unemployment.
- Evaluate why the inflation-unemployment trade-off disappears in the long run.
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