II. True or False short explanations are needed if False) 1. Suppose a long-lasting bad business cycle shock hits the economy. Some workers' skills are destroyed and they are permanently out of the labor unions. If the historical u" is 5% and the current u is 8%, then cyclical unemployment rate equals to 3%. 2. A positive Phillips curve shock (supply shock) always increases inflation and decreasing output. 3. Lucas critique says that using macroeconomic model and estimated parameters to forecast the effect of policy changes may not valid. 4. According to the IS-LM model, increasing government purchase can shift the IS curve to the right because it increases the investment.

II. True or False short explanations are needed if False) 1. Suppose a long-lasting bad business cycle shock hits the economy. Some workers' skills are destroyed and they are permanently out of the labor unions. If the historical u" is 5% and the current u is 8%, then cyclical unemployment rate equals to 3%. 2. A positive Phillips curve shock (supply shock) always increases inflation and decreasing output. 3. Lucas critique says that using macroeconomic model and estimated parameters to forecast the effect of policy changes may not valid. 4. According to the IS-LM model, increasing government purchase can shift the IS curve to the right because it increases the investment.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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