4. An economy is described by the following equations:Y 4,000+2(MIP)ADSRASOkun's LawY= Y +100(P-P)(Y-YY=-2(u-u)In this economy full-employment output Ỹ equals 6,000 and the natural unemployment rate u equals 0.05.a. Suppose that the nominal money supply has long been constant at M 4,000 and is expected by the public to remain constant forever.What is the long-run equilibrium value of the price level (P)?What is the equilibrium value of the expected price level (P)?What is the long-run equilibrium value of output (Y)?What is the long-run equilibrium value of the unemployment rate (u)?b. A totally unexpected increase in the money supply occurs, raising it from 4,000 to 4,400.What is the short-run equilibrium value of the expected price level?What is the short-run equilibrium value of the price level?What is the short-run equilibrium value of output?What is the short-run equilibrium value of the unemployment rate?What is the value of cyclical unemployment?What is the value of unanticipated inflation?(Round your solution to two decimal places).(Round your solution to three decimal places).(Round your solution to three decimal places).% (Round your solution to two decimal places).What is the slope of the short-run Phillips curve in this economy?(Round your solution to two decimal places).

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4. An economy is described by the following equations: AD SRAS Okun's Law Y=4,000+2(MIP) Y=Y+100(P-P) (Y-Y YY =-2(u-u) In this economy full-employment output equals 6,000 and the natural unemployment rate u equals 0.05. a. Suppose that the nominal money supply has long been constant at M = 4,000 and is expected by the public to remain constant forever. What is the long-run equilibrium value of the price level (P)? What is the equilibrium value of the expected price level (P)? What is the long-run equilibrium value of output (Y)? What is the long-run equilibrium value of the unemployment rate (u)?

4. An economy is described by the following equations: AD SRAS Okun's Law Y=4,000+2(MIP) Y=Y+100(P-P) (Y-Y YY =-2(u-u) In this economy full-employment output equals 6,000 and the natural unemployment rate u equals 0.05. a. Suppose that the nominal money supply has long been constant at M = 4,000 and is expected by the public to remain constant forever. What is the long-run equilibrium value of the price level (P)? What is the equilibrium value of the expected price level (P)? What is the long-run equilibrium value of output (Y)? What is the long-run equilibrium value of the unemployment rate (u)?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3) Suppose workers and firms expect the overall price level to increase by 4%. Given this information, we would expect that: A) the real wage will decrease by 4%. B) the real wage will increase by 4%. C) the nominal wage will increase by less than 4%. D) the nominal wage will increase by more than 4%. E) the nominal wage will increase by exactly 4%.
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Suppose an economy is in long-run equilibrium. The central bank reduces the money supply by 5 percent. Use your diagram to show what happens to output and the price level as the economy moves from the initial to the new short-run equilibrium. Price Level LRAS Aggregate Supply Aggregate Demand Quantity of Output Now adjust the graph to show the new long-run equilibrium. Aggregate Demand € Aggregate Supply What causes the economy to move from its short-run equilibrium to its long-run equilibrium? The government increases spending to increase aggregate demand. Nominal wages, prices, and perceptions adjust downward to this new price level. O The government increases taxes to curb aggregate demand. O Nominal wages, prices, and perceptions adjust upward to this new price level.
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