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%.
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%.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter17: The Short-run Trade-off Between Inflation And Unemployment
Section: Chapter Questions
Problem 4PA
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![5. Imagine an economy withv = 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%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd45b7e38-406f-4a21-8154-727a144708f4%2F15e1ae93-eb65-4556-aabb-7665166dbb7b%2Fh36fz6e_processed.jpeg&w=3840&q=75)
Transcribed Image Text:5. Imagine an economy withv = 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%.
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