Question 715.0%14.0%13.0%12.0%11.0%.10.0%9.0%8.0%7.0%6.0%5.0%4.0%3.0%2.0%1.0%0.0%Inflation Rate (n)down to0decreases to5.041,0002,00010.043,0004,0005,000Consider the graph above. It is also in the files folder under the name Short Run andthe Long Run. The graph pertains to a hypothetical country. The central bank in thiscountry (also called the Fed) follows an inflation targeting policy. The current targetinflation rate in 8 percent (I know, it is too high. We will deal with this problem laterafter appointing a new chairperson for the Fed). The natural rate of unemployment is5 percent and Okun's alpha is 8.7000.00LRASSuppose that consumer confidence in the economy declines and as a result ADdecreases by 3,000 units. This reduction in demand causes the inflation rate to slow7.00percent in the short run. In the short run, the real GDPpercent.ADReal GDP (Y)SRAS6,0007,0008,0009,00010,0003 11,00012,00013,00014,00015,00016.00017,00018,00019,00020,000units. Cyclical unemployment increases topercent resulting in an overall unemployment rate ofIf the Fed does not take any action and the recession turns out to be long-lived, theinflation rate will change over time and will equal 5.00percent in thelong run.

The decrease in the AD means that the demand in the economy declines and hence the decline in the…

Consider the graph above. It is also in the files folder under the name Short Run and the Long Run. The graph pertains to a hypothetical country. The central bank in this country (also called the Fed) follows an inflation targeting policy. The current target inflation rate in 8 percent (I know, it is too high. We will deal with this problem later after appointing a new chairperson for the Fed). The natural rate of unemployment is 5 percent and Okun's alpha is 8. Suppose that consumer confidence in the economy declines and as a result AD decreases by 3,000 units. This reduction in demand causes the inflation rate to slow down to 7.00 percent in the short run. In the short run, the real GDP decreases to 5.04 7000.00 units. Cyclical unemployment increases to percent resulting in an overall unemployment rate of

Consider the graph above. It is also in the files folder under the name Short Run and the Long Run. The graph pertains to a hypothetical country. The central bank in this country (also called the Fed) follows an inflation targeting policy. The current target inflation rate in 8 percent (I know, it is too high. We will deal with this problem later after appointing a new chairperson for the Fed). The natural rate of unemployment is 5 percent and Okun's alpha is 8. Suppose that consumer confidence in the economy declines and as a result AD decreases by 3,000 units. This reduction in demand causes the inflation rate to slow down to 7.00 percent in the short run. In the short run, the real GDP decreases to 5.04 7000.00 units. Cyclical unemployment increases to percent resulting in an overall unemployment rate of

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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15.0% 14.0% 13.0% 12.0% 11.0% P 10.0% 2 10.0% 9.0% Inflation Rate (n) 6.0% 5.0% S 4.0% 3.0% 2.0% 1.0% 0.0% 0 LRAS 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 3 11,000 12,000 13,000 Real GDP (Y) 14,000 AD SRAS 15,000 16,000 17,000 18,000 19,000 20,000
15.0% 14.0% 13.0% 12.0% 11.0% . 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Inflation Rate (n) 0 1,000 2,000 3,000 000't 5,000 6,000 000'2 8,000 9,000 000'0 LRAS 3 11,000 12,000 13,000 Real GDP (Y) This policy causes the inflation rate to drop to 14,000 9 AD SRAS 15,000 16,000 17,000 18,000 19,000 20,000 Short Run and Consider the graph above. It is also in the files folder under the name the Long Run. The graph pertains to a hypothetical country. The central bank in this country (also called the Fed) follows an inflation targeting policy. The current target inflation rate in 8 percent. The natural rate of unemployment is 5 percent and Okun's alpha is 8. Finally, the president of the country appoints a new chairperson for the central band and the chair decides to bring the runaway inflation under control (as the U.S. FED did in 1980). The new chair realizes that 8 percent inflation target is way too high. So, s/he decides to reduce the long-term target inflation rate to 2…
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red Question 9 15.0% 14.0% 13.0% 12.0% 11.0% . 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Inflation Rate (n) O 1,000 2,000 000's 000't 5,000 5,000 7,000 8,000 000'60 cyclical unemployment will be LRAS 10,000 3 11,000 Real GDP (Y) In the short run, the inflation rate will equal 12,000 12,000 13,000 13,000 14.000 14,000 000 30 percent. AD 15,000 2009 Consider the graph above. It is also in the files folder under the name Short Run and the Long Run. The graph pertains to a hypothetical country. The central bank in this country (also called the Fed) follows an inflation targeting policy. The current target inflation rate in 8 percent. The natural rate of unemployment is 5 percent and Okun's alpha is 8. SRAS 16,000 The oil producing countries unexpectedly and drastically increase oil prices. As a result the short run aggregate supply function shifts up by 3 percentage points at each and every level of real GDP. 17,000 18,000 19,000 20,000 If the Fed tries to bring the inflation…
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