4. Study Questions and Problems #4Suppose you flipped an honest coin 10 times and tails came up 4 times. You are about to toss the coin another 10 times.Complete the statements that follow to indicate how many tails you would expect in the next 10 coin flips based on adaptive expectations theory andrational expectations theory.Using adaptive expectations, you would expecttails to come up.Using rational expectations, you would expecttails to come up.

adaptive expectations- 4rational expectations- 5Explanation:Adaptive Expectations: 4This will use…

Answered: 4. Study Questions and Problems #4…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A decrease in the natural unemployment rate shifts the long-run Phillips curve ________ and ________ theshort-run Phillips curve.A) rightward; does not shiftB) leftward; shifts rightwardC) rightward; shifts rightwardD) leftward; shifts leftward. Please type out the correct answer ASAP within 40 50 minutes with proper explanation of the each option given. Thank you.
Economics Options for the first 3 blanks (increase, derease, no change,) Option for last: rational expectations theory, monetarism, keynesian theory
3. Explain how a rise in Government expending affects:3.1. The Phillips curve in the short run? How do you think are employers and employees going to react to this policy under adaptive expectations? 3.2. If the demand policy continues to apply how this is going to affect the Philips curve in the long run? 3.3. What about if the agents have rational expectations, is this policy effective?
With rational expectations, a policy that would increase AD would lead to (a) higher inflation and lower unemployment in the short run if people underestimated the effect of the policy on inflation. (b)higher inflation and higher unemployment in the short run if people underestimated the effect of the policy on inflation. (c) higher inflation and no change in unemployment in the short run, if people's expectations were correct. (d) higher inflation and an indeterminate effect on unemployment in the short run, if people's expectations were correct
Match the statement to whether it describes rational expectations or adaptive expectations: A. Decisions are relatively slow to respond to new information about the economy B. If people expect it to rain a lot next month, they will start buying umbrellas today to take advantage of the relatively lower prices 1. Rational expectations 2. Adaptive expectations
Pick one answer for each question. 1. According to a neoclassical economist, the government should respond to a decrease in aggregate demand by ______. A. raising interest rates B. doing nothing C. balancing the budget 9. From a neoclassical perspective, the Phillips curve is vertical because ______. A. long-run unemployment is fixed at the natural rate of unemployment B. long-run aggregate supply is always the same as short-run aggregate supply c. the inflation rate is fixed in the long-run
Briefly discuss the difference between rational and adaptive expectations. (100 words max)
Phillips Curve - This graph shows the inverse relationship between inflation and unemployment in the economy. It is used to illustrate the trade-off between inflation and unemployment and to help policymakers decide on appropriate policy responses. show this graph with an example.
Q : Explain what it means that the phillips curve presents policy makers with a menu of choices?
If the government uses contractionary monetary policy to reduce inflation from 9 to 6 percent. If people have adaptive expectations, than Inflation rate (%) 12 10 9 8 6 4 0 4 Long run Phillips curve Natural rate 5 E Short run Phillips curve 9 Unemployment rate (%) Unemployment will rise to 8 percent in the short run. The natural rate will permanently increase to 8 percent The economy will remain stuck at point E1. Unemployment will remain at 6 percent as the inflation rate falls.
Which of the following is correct if there is a favorable supply shock? a. the short-run aggregate supply curve and the short-run Phillips curve both shift right. b. the short-run aggregate supply curve and the short-run Phillips curve both shift left. c. the short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right. d. the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left.
9. Study Questions and Problems #9 Initially, the economy is operating at the natural unemployment rate of 4%, and the inflation rate is also 4%. People correctly anticipate that the Fed's hike in the discount rate will cause the inflation rate to fall to 2%. According to rational expectations, inflation , and the unemployment rate 4% in the short run. In the long run, the unemployment rate will be 4%.

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