5.9B Long-Run Phillips Curve Practice HOMEWORK Set up a correctly labeled Phillips Curve graph to begin each scenario. Begin at long-run equilibrium. Assume the natural rate of unemployment is 5%. Then, show and explain below what happens to the short-run Phillips curve. When showing a movement along the curve, label the initial point, A, and the new point, B. Use standard notation when shifting the curve. Numbers lis completed for you. 1. Government spending increases. 2. Inflation expectations rise from 3% to 6%. LRPC 2 3 4 5 6 7 8 9 10 11 Inflation B SRPC 0 1 2 3 4 5 6 7 8 9 10 11 Unemployment 3. The price of crude oil and most sources of energy 4 . The Fed increases interest rates with contractionary monetary policy. decreases