Question

In: Economics

3. A) Philips curve is represented by the following relationship: π = ?̃ – 10(U –...

3.

A) Philips curve is represented by the following relationship:

π = ?̃ – 10(U – ?̅) + s, where s is a supply shock term, on average equal to zero.

Draw the Phillips curve when ?̅ = 7% and underlying inflation ?̅ = 3% and 6%.

Okun’s Law is

U – ?̅ = -0.5 (Y – ?̅)/?̅.

Draw the aggregate supply schedule when ?̅ = 10,000.

B) Using the conditions of the above exercise, show the impact of supply shocks s = 5%, and s = -2%. Separately show the effect of raising ?̅ to 10,200. Why is it argued that improving the performance of the supply side of the economy is good for both inflation and employment?

TYPED ANSWER

Solutions

Expert Solution

Solution:

(A)

at %

at %

putting value of second equation in first.

if

if s=5%

at %

at %

if s=5%

at %

at %

(B)

if

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

The relationship between inflation and unemployment is given by π = π$ − 3(u − 0.06)....
The relationship between inflation and unemployment is given by π = π$ − 3(u − 0.06). (a) What is the value of the natural rate of unemployment? (b) If actual inflation is 0.02 and expected inflation is 0.05, what is the unemployment rate? (c) If an aggregate demand shock (resulting from increased exports of goods) raises the inflation rate to 0.08 (the natural rate of unemployment and the expected inflation rate are not affected). What is the numerical value of...
3. Consider the Phillips curve: Π = EΠ - B(u - un) + v    Π...
3. Consider the Phillips curve: Π = EΠ - B(u - un) + v    Π = inflation           EΠ =expected inflation        v=supply shock       u=unemployment rate     uN=natural unemployment rate Explain the effect on the Phillips curve and the Phillips curve tradeoff due to the Covid 19 virus.
a) Explain the relationship between unemployment and inflation using the concept of Philips curve. What are...
a) Explain the relationship between unemployment and inflation using the concept of Philips curve. What are the critics on Philips Curve? b) Use the Phillips Curve to explain policy responses to a supply shock caused by increase in the world price of oil c) Discuss Walras's Law statement that the sum of the nominal excess demands for all goods in the economy must be zero.
Explain the concept of philips curve. Discuss how aggregate supply and philips curve are related to...
Explain the concept of philips curve. Discuss how aggregate supply and philips curve are related to each other?
The positive relationship between inflation and unemployment in the Philips curve comes from that Job searchers...
The positive relationship between inflation and unemployment in the Philips curve comes from that Job searchers underestimate the future inflation Job searchers overestimate the future inflation Firms have no expectation When the Fed buys bonds, it: Changes the size of the money multiplier Decreases the money supply Increases the money supply if people are very sensitive to the interest rate change, which of the following is a more effective policy to control the inflation in the short run? A ten-year...
Suppose that the tradeoff between unemployment and inflation is determined by the Phillips curve: u=un –α(π−Eπ),...
Suppose that the tradeoff between unemployment and inflation is determined by the Phillips curve: u=un –α(π−Eπ), where u denotes the unemployment rate, un the natural rate, π the rate of inflation, and Eπ the expected rate of inflation. In addition, suppose that the High Party always follows a policy of high money growth and the Low Party always follows a policy of low money growth. What “political business cycle” pattern of inflation and unemployment would you predict under the following...
5) Philips curve and monetary policy a) Show on a graph how short-run and long-run Philips...
5) Philips curve and monetary policy a) Show on a graph how short-run and long-run Philips curve relates to the ASAD model. How a shock to the aggregate supply can affect the Phillips curve? (11.3 marks) b) Discuss Friedman’s idea of the long-run versus short-run Phillips curve by including the idea of natural unemployment rate and the role of expected inflation. What is the sacrifice ratio? c) Explain the idea of rational expectations, inflation targeting, and the Taylor rule. d)...
Considering the Philips Curve as ? = 0.02 − 0.6 (?−0.05), and the government announces that...
Considering the Philips Curve as ? = 0.02 − 0.6 (?−0.05), and the government announces that it implements an expansionary monetary policy: • E1) Describe the Locus Critique. ( 5 points) • E2) Considering the Locus Critique, do you think that the above Philips Curve is a good equation to study the relationship between inflation and unemployment? Why? Explain it. ( 5 points)
The demand curve for turnip can be represented by the following equation: ? = 2000 −...
The demand curve for turnip can be represented by the following equation: ? = 2000 − 400? There are only two producers and the marginal cost to produce a turnip is $2 (There is no fixed cost). If the capacity of each firm is 600 output, calculate the price range of turnip under the Bertrand-Edgeworth Model.
3. Consider the parametric curve x = sin 2t, y = − cos 2t for −π/4...
3. Consider the parametric curve x = sin 2t, y = − cos 2t for −π/4 ≤ t ≤ π/4. (a) (2 pts) Find the Cartesian form of the curve. (b) (3 pts) Sketch the curve. Label the starting point and ending point, and draw an arrow on the curve to indicate the direction of travel. (c) (5 pts) Find an equation for the curve’s tangent line at the point √2/2, −√2/2 .
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT