9yt = 9mt Tt - Ut ut-1= P(gyt - gy) πt − πt_1 = -α(ut — un) The beta in Okun's law is 0.4 The alpha in the Philips curve is 1. The natural rate of growth is 5%. The Natural Unemployment rate is 6% The policy instrument is money growth gmt. - 1. The Economy is at its medium-run equilibrium with inflation at 8%. What is the current growth rate of the Money Supply, gmt? 2. Given the above conditions if the Central Bank decides to follow a disinflation strategy and bring its level down from 6% to 2% over a period of 2 years then stabilize the economy. What will happen to Unemployment, Inflation and Money Growth in the next few years? 3. Define a point year of excess unemployment and the sacrifice ratio.

9yt = 9mt Tt - Ut ut-1= P(gyt - gy) πt − πt_1 = -α(ut — un) The beta in Okun's law is 0.4 The alpha in the Philips curve is 1. The natural rate of growth is 5%. The Natural Unemployment rate is 6% The policy instrument is money growth gmt. - 1. The Economy is at its medium-run equilibrium with inflation at 8%. What is the current growth rate of the Money Supply, gmt? 2. Given the above conditions if the Central Bank decides to follow a disinflation strategy and bring its level down from 6% to 2% over a period of 2 years then stabilize the economy. What will happen to Unemployment, Inflation and Money Growth in the next few years? 3. Define a point year of excess unemployment and the sacrifice ratio.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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