5. Imagine an economy with = 1/5. Inflation expectations are zero. The economy receives a cost push shock & = 0.1. How negative must short run-output be so that inflation is equal to 2%. 6. Imagine inflation is 10%, and the central bank wants to have inflation equal to 2%. When announcing information about future monetary policy, the central bank brings inflation expectations to 4%. The slope of the Phillips Curve is 1/3. Cost push shocks are zero. How much must short-run output fall to achieve the goal of 2% inflation? 7. Repeat the last exercise assuming that the announcement of future monetary policy is less effective, bringing inflation expectations to 8%.
5. Imagine an economy with = 1/5. Inflation expectations are zero. The economy receives a cost push shock & = 0.1. How negative must short run-output be so that inflation is equal to 2%. 6. Imagine inflation is 10%, and the central bank wants to have inflation equal to 2%. When announcing information about future monetary policy, the central bank brings inflation expectations to 4%. The slope of the Phillips Curve is 1/3. Cost push shocks are zero. How much must short-run output fall to achieve the goal of 2% inflation? 7. Repeat the last exercise assuming that the announcement of future monetary policy is less effective, bringing inflation expectations to 8%.
Chapter27: Issues In Macroeconomic Theory And Policy
Section: Chapter Questions
Problem 13P
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Please help solve 5, 6, and 7!
![5. Imagine an economy with v = 1/5. Inflation expectations are zero. The economy
receives a cost push shock & = 0.1. How negative must short run-output be so that
%3D
inflation is equal to 2%.
6. Imagine inflation is 10%, and the central bank wants to have inflation equal to
2%. When announcing information about future monetary policy, the central bank
brings inflation expectations to 4%. The slope of the Phillips Curve is 1/3. Cost
push shocks are zero. How much must short-run output fall to achieve the goal of
2% inflation?
7. Repeat the last exercise assuming that the announcement of future monetary policy
is less effective, bringing inflation expectations to 8%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc533429f-d6cd-4370-8355-17fb8d46b636%2F1d1f73cb-6287-41b3-b791-d0ff14152af2%2Feyu2lx_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5. Imagine an economy with v = 1/5. Inflation expectations are zero. The economy
receives a cost push shock & = 0.1. How negative must short run-output be so that
%3D
inflation is equal to 2%.
6. Imagine inflation is 10%, and the central bank wants to have inflation equal to
2%. When announcing information about future monetary policy, the central bank
brings inflation expectations to 4%. The slope of the Phillips Curve is 1/3. Cost
push shocks are zero. How much must short-run output fall to achieve the goal of
2% inflation?
7. Repeat the last exercise assuming that the announcement of future monetary policy
is less effective, bringing inflation expectations to 8%.
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