Explain the meaning of flat Phillips curve in AD-AS framework. Compared with the steeper Phillips curve,...

Explain the meaning of flat Phillips curve in AD-AS framework. Compared with the steeper Phillips curve, when the Phillips curve is relatively flat, what is the impact of the given aggregate demand shock on the economy?

What is the possible impact of the flat Phillips curve on fiscal policy and monetary policy?

Expert Solution

Rahul Sunny answered 2 years ago

By using AD-AS and Phillips Curve analysis, explain what happens to output and price level as...

By using AD-AS and Phillips Curve analysis, explain what happens to output and price level as well as unemployment and inflation rates for each of the situations listed below: a) The government reduces the tax rate for individual income in order to encourage households’ spending. b) Central Bank increases the required reserve ratio.

Suppose that there is a fall in oil prices. Use the Phillips curve and/or the AD-AS...

Suppose that there is a fall in oil prices. Use the Phillips curve and/or the AD-AS model to show the short run effects on the economy. State clearly what happens to inflation and unemployment. Why does this pose a challenge for the Fed?

Using the Phillips Curve framework, explain how there is a trade-off between unemployment and inflation. Use...

Using the Phillips Curve framework, explain how there is a trade-off between unemployment and inflation. Use a graph and equation to model this trade-off. Then show with a graph and equation what happens if inflation expectations increase from, for example, 3% to 8%. Graph and explain. Assume the natural rate of unemployment is 4%. Currently, the unemployment rate is 8%. Last period the economy experienced 5% inflation. Using the concepts of the Phillips Curve, discuss your diagnosis for the economy...

INFLATION AND THE PHILLIPS CURVE explain with your own words 1 What is the Phillips curve?...

INFLATION AND THE PHILLIPS CURVE explain with your own words 1 What is the Phillips curve? 2 What is the relationship between inflation and growth?

Assume the economy is initially in a long run equilibrium. a. Use AD-AS and Phillips curve...

Assume the economy is initially in a long run equilibrium. a. Use AD-AS and Phillips curve diagrams to show the short run effects in prices (inflation) and output (employment) if firms are pessimistic about economy in the future b. In order to maintain output what would government do with fiscal policy in response to event in part a

What is the Phillips curve? Discuss both the short-run and long-run Phillips curve. Explain how the...

What is the Phillips curve? Discuss both the short-run and long-run Phillips curve. Explain how the expected inflation rate affects the short-run Phillips curve. Be sure to mention the role played by the money wage rate. When the natural unemployment rate changes, what happens to the short-run Phillips curve? To the long-run Phillips curve?

1.(i) Using the AD/AS model, discuss the changes to the economy that the Phillips curve explains...

1.(i) Using the AD/AS model, discuss the changes to the economy that the Phillips curve explains well, and describe under what conditions the Phillips curve fails to explain economic behavior. Include graphs of the Phillips curve and the AD/AS model in your answer 2.(ii) In the late 1990s, the U.S. economy experienced a period of extremely low inflation and extremely low unemployment. Use the AD/AS model to explain what sort of change in the economy would cause this. Include a...

Draw the modern Phillips Curve and assume v of the Phillips Curve is 1. Show and...

Draw the modern Phillips Curve and assume v of the Phillips Curve is 1. Show and explain the effects of the crisis. By exactly how much should inflation change? Be sure to label everything.

What is the difference between the traditional Phillips curve and the expectations augmented Phillips curve and...

What is the difference between the traditional Phillips curve and the expectations augmented Phillips curve and what are the implications of that difference for stimulatory monetary policy?

The Phillips curve, supply shocks, and wage flexibility Suppose that the Phillips curve is given by...

The Phillips curve, supply shocks, and wage flexibility Suppose that the Phillips curve is given by ?? = ?? ? − ?(?? − ?? ) (1) where the natural rate of unemployment, ?? = ?+? ? . [Recall that this Phillips curve was derived under price-setting and wage-setting: ?? = (1 + ?) ?? (2) ?? = ?? ? (1 − ??? + ?) (3) where m is the mark up over marginal cost, which is just the wage rate...

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