A country's Central Bank is characterised by the following Loss function (L) and Phillips Curve (PC): Loss Function: L = (₁-₂)² +0.2(π₁ - 777² Phillips Curve: TT₁=Tt-1 +2(t-Ye) Where yt is actual output at time t, ye is potential output, π and π-1 are actual inflation at time t and time t-1 respectively, and is target inflation. Given this information, select ALL the CORRECT statements: The central bank's best response to shocks that affect this economy is given by (Yt-Ye) = -0.2 (π- TTT). If inflation becomes more sensitive to changes in output, the MR becomes flatter. This central bank is unemployment averse. This Phillips curve uses adaptive expectations to form expectation on future inflation.

A country's Central Bank is characterised by the following Loss function (L) and Phillips Curve (PC): Loss Function: L = (₁-₂)² +0.2(π₁ - 777² Phillips Curve: TT₁=Tt-1 +2(t-Ye) Where yt is actual output at time t, ye is potential output, π and π-1 are actual inflation at time t and time t-1 respectively, and is target inflation. Given this information, select ALL the CORRECT statements: The central bank's best response to shocks that affect this economy is given by (Yt-Ye) = -0.2 (π- TTT). If inflation becomes more sensitive to changes in output, the MR becomes flatter. This central bank is unemployment averse. This Phillips curve uses adaptive expectations to form expectation on future inflation.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The Taylor Rule is given by rt = it +Pt+ 0.5(it - i*t) + 0.5(u*t-ut) The Federal Reserve is targeting 2% inflation and the natural rate of unemployment is believed to be 4.7%. Economic data suggests that the inflation rate is currently 4.7% while the unemployment rate is 9.8%. The real rate of interest is believed to be 2.5%. According to the Taylor Rule, what target should the Federal Reserve set for the Federal Funds Rate? Put your final answer in percentage form (e.g. 30.57 not 0.3057), but be careful about this. If you just use the numbers as is, you don't need to adjust anything. Round your final answer to two decimal places. Both positive and negative answers are possible.
The government of Econtopia considers two policies to boost the economy. Policy A is to increase the Government Spending that would shift AD right by 500 units. Policy B is to increase the Money Supply would shift AD right by 300 units. According to the Short-Run Phillips Curve, Policy A will lead to a lower unemployment rate and a lower inflation rate than policy B. to a lower unemployment rate and a higher inflation rate than policy B. to a higher unemployment rate and lower inflation rate than policy B. O to a higher unemployment rate and higher inflation rate than policy B.
Consider a typical downward sloping short run Phillips curve. Which combination of events could cause 1) a movement along the particular short run Phillips curve (SRPC) to the "south-east" and then followed by 2) a leftward shift of the entire SRPC? Group of answer choices a)Decrease in government spending followed by a rightward shift in the short-run aggregate supply curve. b) Increase in money supply followed by a rightward shift in the short-run aggregate supply curve. c)Decrease in government spending followed by a leftward shift in the short-run aggregate supply curve. d)Increase in government spending followed by a rightward shift in the short-run aggregate supply curve.
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Derive the original Phillips curve and answer the following questions:a) What effect does an increase in the expected price level have on the price level?b) What effect does an increase in the unemployment rate have on the price level?c) What effect does a decrease in business competition have on inflation?d) What is the effect of liberalizing foreign trade?e) What effect does the formation of trade unions have?
Can you please help me with D) and E) please and thanks.
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Assume that the economy self corrects to long-run equilibrium without a governmental policy. Which of the following is the correct adjustment on the Phillips Curve Graph?