Assume that α = β = 1, derive the MR curve graphically using the tangencies between the loss circles and the Phillips curves. With reference to the diagrams, explain the effect of the following (in each case, assume all other parameters are held constant):(a) An increase in the slope of the Phillips curve, α.
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Assume that α = β = 1, derive the MR curve graphically using the tangencies between the loss circles and the Phillips curves. With reference to the diagrams, explain the effect of the following (in each case, assume all other parameters are held constant):
(a) An increase in the slope of the Phillips curve, α.
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- I'm a newbie so please step by step, thanks in advance. we should check for implicit function and use jacobean rule(??)Question 10 (5 points) Q10. In the wake of the Covid-19 pandemic, many economists argued that inflation was being driven by disruptions to complex and geographically dispersed (global) supply chains. Assuming that is true, or partly true, which of the following would be the best way to alter the Philipps' Curve equation above [n = - a (Uª – U*)] to reflect the impact of supply chains. Which makes the most sense, where is the rate of inflation, Ua is the actual 回 unemployment rate, U* is the full employment rate of unemployment (or the maximum unemployment rate before the economy experiences accelerating inflation), and is a variable measuring the efficiency gained from well-functioning supply chains. =-a (Ua - U •)- €, =-a (Ua-U)+E M-a (Ua - UXE T=-E/-a (Ua-U)] Inflation is caused by excessive cannabis consumption, which is giving many people in our society the delusion of feeling good while eroding the productivity (don't choose this one).Following data is given for two country Keynesian model with no government (G=T=0) C= 100+0.9Y C* =200+0.8Y* I= 200 |* =400 M=0.1Y M*=0.2Y* NOTE: use a 2-digit accuracy in your calculations, i.e. 1.467238=1.47 or 1.43488=1.43 a. The equilibrium income for the domestic economy is; Y= b. The equilibrium income for the foreign economy is: Y*= c. Assume that the domestic exports increases by 150 units. As a result of this the change in the domestic income is; AY= d. Due to the change in part c, the change in foreign income is; AY*= e. The initial value of the current account balance in domestic economy is; CAB= f. The change in the domestic current account balance due to the change in part c is; ACAB =
- Suppose the aggregate price level has decreased, but workers did not notice this initially. Suppose the supply curve of labor initially looked as follows. According to our self-correcting model, once workers notice that the aggregate price level has decreased, Group of answer choices a) the SL curve will increase (shift right). b) none of the other options. c) the SL curve will decrease (shift left). d) nothing will happen to the Supply of Labor (SL) curve. e) the equilibrium wage level, W, will rise.For this question, assume that the Phillips curve equation is represented by the following equation: πt - πt-1 = (m + z) - αut. A reduction in the unemployment rate will cause A) a reduction in the markup over labor costs (i.e., a reduction in m). B) an increase in the markup over labor costs. C) an increase in the inflation rate over time. D) a decrease in the inflation rate over time. E) none of the aboveAggregate demand, aggregate supply, and the Phillips curve In the year 2027, aggregate demand and aggregate supply in the imaginary country of Daisen-Oki are represented by the curves AD 2027 and AS on the following graph. The price level is currently 102. The graph also shows two potential outcomes for 2028. The first possible aggregate demand curve is given by the curve labeled AD(a) curve, resulting in the outcome given by point A. The second possible aggregate demand curve is given by the curve labeled AD(b), resulting in the outcome given by point B. Suppose the unemployment rate is 7% under one of these two outcomes and 6% under the other. Based on the previous graph, you would expect (OUTCOME A or OUTCOME B) to be associated with the higher unemployment rate (7%). If aggregate demand is high in 2028, and the economy is at outcome B, the inflation rate between 2027 and 2028 is (1.96% or 5.00% or 4.00% or 2.94%). Based on your answers to the previous…
- 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?There’s a change in Federal Reserve policy regarding the growth of the money supply. What if the markets do not believe in the policy?Suppose that the level of unemployment in the economy is determined by the follow equation: U = 7.55 1.88*(i - ie) Where U is the unemployment rate, i is the actual inflation rate, and it is the expected inflation rate. All variables are entered in percentage form (e.g. if inflation is 30.57%, you plug in 30.57 for i, not 0.3057). Last year, the inflation rate was 7.87%, and people have adaptive expectations. What does the inflation rate need to be this year in order for the unemployment rate to be 2.81%? Note: Everything is already in percentage form. You do not need to multiply or divide by 100 at any point. Enter in your answer as it is calculated in the equation. Round your final answer to two decimal places.
- Assume the economy is described by the following equations: Phillips Curve: Okun's Law: T = Tt-1 – 1.5% – (ut – 0.05) AY/Y = 3% - 3(ut– 0.05) a) How could we know that expectations are not rational in this setup? b) Imagine that last year's inflation is equal to 11%. Imagine the Federal Reserve raises unemployment to 8% and keeps it there until inflation reduces to 2%. How many years of 8% unemployment would it take for inflation to reach 2%? c) What values of inflation would we observe over time as inflation reached 2%? d) How much output is lost to bring down inflation to 2%?There is an on‐going debate on how unemployment benefits affect the unemployment rate. In the context of the Mortensen‐Pissarides model, unemployment benefits are represented by the variable b. Explain carefully how an increase in b affects each equilibrium condition (Beveridge curve, vacancy supply condition, and wage setting curve.) How is the steady‐state unemployment rate impacted by an increase in b? Use the simulation tool here, https://www.briancjenkins.com/dmp‐model/simulation‐tool.html, to check your answer.Problem 2. Consider the following Phillips Curve n = En – 0.6(u – 0.05) a) Explain the above Philips Curve briefly. b) Assume that Ex = 0.02. Draw the graph of the Phillips curve. What is the slope of the curve? What are the long-run unemployment rate and the long-run inflation rate? c) Is there any possibility that a government can decrease the inflation rate without any change in the unemployment rate? If yes, how? Explain it. d) Is there any possibility that a government can increase the inflation rate without any change in the unemployment rate? If yes, how? Explain it. e) Considering the Philips Curve as T = 0.02 – 0.6(u – 0.05), and the government announces that it implements an expansionary monetary policy: • el) Describe the Lucas Critique. • e2) Considering the Locus Critique, do you think that the above Philips curve is a good equation to study the relationship between inflation and unemployment? Why? Explain it.