Consider the following model (1) (11) y(t) =9 +0.2(m-p(t)) π(t+1)=1.2(y(t)—yn) m = 5 y₁ = 6 (iii) What is the equilibrium price level if the natural level of income falls from 6 to 4 (a rise in the natural level of unemployment)? 3 What is the equilibrium price level? What is the equilibrium price level after the money supply increases from 5 to 8? (iv) plot p(t) for t=0 to 20 on one graph for the price-adjustment coefficients (slope of the Phillips curve) 1.2, 1.5 and 2, assuming p(0) = 10. Assume the initial price is 10, m=5 and yn = 6. (vi) Also, plot on one graph the dynamic responses to income, y(t). [Hint: if the initial price is 10, what is the initial income?] Comment on your results.
Consider the following model (1) (11) y(t) =9 +0.2(m-p(t)) π(t+1)=1.2(y(t)—yn) m = 5 y₁ = 6 (iii) What is the equilibrium price level if the natural level of income falls from 6 to 4 (a rise in the natural level of unemployment)? 3 What is the equilibrium price level? What is the equilibrium price level after the money supply increases from 5 to 8? (iv) plot p(t) for t=0 to 20 on one graph for the price-adjustment coefficients (slope of the Phillips curve) 1.2, 1.5 and 2, assuming p(0) = 10. Assume the initial price is 10, m=5 and yn = 6. (vi) Also, plot on one graph the dynamic responses to income, y(t). [Hint: if the initial price is 10, what is the initial income?] Comment on your results.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
iv, v and vi please
![Consider the following model
(ii)
(iii)
(iv)
(v)
(vi)
y(t) = 9+0.2(m— p(t))
π(t+1)=1.2(y(t)- y₂)
m = 5 y₁ = 6
What is the equilibrium price level?
What is the equilibrium price level after the money supply increases from 5 to
8?
What is the equilibrium price level if the natural level of income falls from 6
to 4 (a rise in the natural level of unemployment)?
plot p(t) for t = 0 to
20 on one graph for the price-adjustment coefficients (slope of the Phillips
curve) 1.2, 1.5 and 2, assuming p(0) = 10. Assume the initial price is 10, m = 5
and yn = 6.
Also, plot on one graph the dynamic responses to income, y(t). [Hint: if the
initial price is 10, what is the initial income?]
Comment on your results.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F1b2e65f2-c472-45bf-885c-00dffce84016%2F51950d15-4cea-4603-8db5-3c2d45d4f267%2F121j5vq_processed.png&w=3840&q=75)
Transcribed Image Text:Consider the following model
(ii)
(iii)
(iv)
(v)
(vi)
y(t) = 9+0.2(m— p(t))
π(t+1)=1.2(y(t)- y₂)
m = 5 y₁ = 6
What is the equilibrium price level?
What is the equilibrium price level after the money supply increases from 5 to
8?
What is the equilibrium price level if the natural level of income falls from 6
to 4 (a rise in the natural level of unemployment)?
plot p(t) for t = 0 to
20 on one graph for the price-adjustment coefficients (slope of the Phillips
curve) 1.2, 1.5 and 2, assuming p(0) = 10. Assume the initial price is 10, m = 5
and yn = 6.
Also, plot on one graph the dynamic responses to income, y(t). [Hint: if the
initial price is 10, what is the initial income?]
Comment on your results.
Transcribed Image Text:t
0
1
2
m =
yn =
p2(t)
O. =
B1
B2
B3
p1(t) y1(t)
p2(t) y2(t)
10
10
0
0
10
0
12.4
7.52
12.4
14.224
7.52
7.1552
12.4
14.224
7.52
7.1552
14.224 7.1552
3 15.61024 6.877952 15.61024 6.877952 15.61024 6.877952
4 16.66378 6.667244 16.66378 6.667244 16.66378 6.667244
5 17.46447 6.507105 17.46447 6.507105 17.46447 6.507105
6 18.073 6.3854 18.073 6.3854 18.073 6.3854
7 18.53548 6.292904 18.53548 6.292904 18.53548 6.292904
8 18.88697 6.222607 18.88697 6.222607 18.88697 6.222607
9 19.15409 6.169181 19.15409 6.169181 19.15409 6.169181
10 19.35711 6.128578 19.35711 6.128578 19.35711 6.128578
11 19.5114 6.097719 19.5114 6.097719 19.5114 6.097719
12 19.62867 6.074267 19.62867 6.074267 19.62867 6.074267
13 19.71779 6.056443 19.71779 6.056443 19.71779 6.056443
14 19.78552 6.042896 19.78552 6.042896 19.78552 6.042896
15 19.83699 6.032601 19.83699 6.032601 19.83699 6.032601
16 19.87612 6.024777 19.87612 6.024777 19.87612 6.024777
17 19.90585 6.01883 19.90585 6.01883 19.90585 6.01883
18 19.92844 6.014311 19.92844 6.014311 19.92844 6.014311
19 19.94562 6.010876 19.94562 6.010876 19.94562 6.010876
20 19.95867 6.008266 19.95867 6.008266 19.95867 6.008266
5
6
y2(t)
0.2
1.2
1.2
1.2
p(t)
y(t)
2222 900
20
18
16
14
12
10
7
6
8
-p100
Price adjustment
-yi(t)
p2(0)
Income adjustment
t
-y2(1)
p3t)
y3(t)
20
Expert Solution
Step 1: Define inflation
Inflation is an economic phenomenon characterized by a sustained and general increase in the overall price level of goods and services in an economy over a period of time. In simpler terms, when inflation occurs, each unit of a country's currency buys fewer goods and services than it did in the past.
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