Use the Following Information to Explain and Draw a Graph

question 22

Essay

Use the following information to explain and draw a graph showing the short-run and long-run Phillips curves.
Natural rate of unemployment = 5%
Current rate of unemployment = 3%
Expected inflation rate = 2.9%
Current inflation rate = 6.2%
_____________________________________________________________________________________________
_____________________________________________________________________________________________

---

Definitions:

Optimal Level

In economics, the optimal level refers to the most efficient, effective, or desirable point of operation or outcome in terms of maximizing benefits or minimizing costs.

Short Run

The Short Run is a period during which at least one factor of production is considered fixed in supply, limiting the ability of a business to alter its output levels.

Monopolistically Competitive

A market structure characterized by many sellers offering differentiated products, leading to competition based on product quality, price, and marketing.

Fixed Cost

An expense that does not vary with the volume of production, such as insurance or lease payments.