(Solved): 7. The long-run effects of monetary policy The following graphs show the state of an economy that ...

7. The long-run effects of monetary policy The following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC). ? LRÅS PRICE LEVEL 0 2 4 6 8 OUTPUT (Trillions of dollars) 10 AD 12 ? AD LRAS INFLATION RATE LRPC 4 SRPC 0 3 9 12 18 UNEMPLOYMENT RATE (Percent) Which of the following statements are true based on these graphs? Check all that apply. The natural level of output is $6 trillion. The unemployment rate is currently 9% higher than the natural rate of unemployment. The current quantity of output is greater than potential output. Suppose the central bank of the economy decreases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. The long-run effect of the central bank's policy is in the inflation rate, in real GDP. (? SRPC LRPC in the unemployment rate, and