3. (a) Explain what the 'Phillips Curve' (PC) is and how it arises theoretically. [Hint: You do not need to derive it fully rigorously, but you do need to outline how it is obtained.] Critically discuss whether the PC receives support from empirical evidence. (b) Analyse the effects in the short and medium run of an oil price increase in the context of the IS-LM-PC model; in doing so, explain how the system moves from the short- to the medium-run equilibrium.

3. (a) Explain what the 'Phillips Curve' (PC) is and how it arises theoretically. [Hint: You do not need to derive it fully rigorously, but you do need to outline how it is obtained.] Critically discuss whether the PC receives support from empirical evidence. (b) Analyse the effects in the short and medium run of an oil price increase in the context of the IS-LM-PC model; in doing so, explain how the system moves from the short- to the medium-run equilibrium.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

3. (a) Explain what the 'Phillips Curve' (PC) is and how it arises theoretically. [Hint:
You do not need to derive it fully rigorously, but you do need to outline how it is
obtained.] Critically discuss whether the PC receives support from empirical
evidence.
(b) Analyse the effects in the short and medium run of an oil price increase in the
context of the IS-LM-PC model; in doing so, explain how the system moves from the
short- to the medium-run equilibrium.

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