If the public adopts rational expectations O The Phillips curve is vertical at the current rate of unemployment O The Phillips curves moves according to expectations about inflation The Phillips curve is horizontal at the target inflation rate The Phillips curve is vertical at the natural rate of unemployment

If the public adopts rational expectations O The Phillips curve is vertical at the current rate of unemployment O The Phillips curves moves according to expectations about inflation The Phillips curve is horizontal at the target inflation rate The Phillips curve is vertical at the natural rate of unemployment

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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D Question 1 The short-run Phillips curve is a curve that shows the relationship, other things being constant, between and O the inflation rate; the unemployment rate O the inflation rate; the nominal interest rate O the unemployment rate; real GDP 0.1 pts O potential GDP; the natural unemployment rate O the inflation rate; the expected inflation rate .
If the government uses contractionary monetary policy to reduce inflation from 9 to 6 percent. If people have adaptive expectations, than Inflation rate (%) 12 10 9 8 6 4 0 4 Long run Phillips curve Natural rate 5 E Short run Phillips curve 9 Unemployment rate (%) Unemployment will rise to 8 percent in the short run. The natural rate will permanently increase to 8 percent The economy will remain stuck at point E1. Unemployment will remain at 6 percent as the inflation rate falls.
From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have raised inflation and unemployment. Oraised inflation and reduced unemployment. O reduced inflation and raised unemployment. O reduced inflation and unemployment.
Explain correct option and explanation of the incorrect options Note: Hand written solutions are prohibited.
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The natural unemployment rate is 6 percent and the expected inflation rate is 10 percent a year. Draw the long-run Phillips curve. Label it LRPCo. Draw the short-run Phillips curve. Label it SRPC- Draw a point at the natural unemployment rate and the expected inflation rate. Label it 1. Now the natural unemployment rate rises to 9 percent with no change in the expected inflation rate. Draw and label LRPC₁. Draw and label SRPC₁. Draw a point at the natural unemployment rate and the expected inflation rate. Label it 2. 20- 16- 12- 8- 4. 0- Inflation rate (percent per year) Q Q 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Unemployment rate (percentage of labor force) >>> Draw only the objects specified in the question.
Suppose the Phillips curve is given by the following: 2ut It Where: π = Tt-1 Suppose πt-1 = 0; at year t, authorities decide to keep unemployment rate at 4% forever. a. Compute the rate of inflation for years t+1, t+2 and t+3. b. Suppose half of labor contract of workers has been indexed. What is the new equation for the Phillips curve? Compute the rate of inflation for years t+1, t+2 and t+3. i. π = 0.1 ii. iii. Compared to your answers in problem (a), what can you conclude?
Rate Inflation 7 6 5 4 N 1 0 -1 -2 -3 0 De graph below depicts a short-run Phillips Curve. Move the line as needed to depict a long-run Phillips curve, then answer the question to the right. O 1 2 3 4 5 6 7 Unemployment Rate 8 9 10 The relationship between inflation and unemployment in the short run is different from their relationship in the long run. Which of the following is an important factor in that difference? Inflation Expectations Tax Rates Price Levels Okun's Law
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