Answered: In order to gauge π^e , the rational…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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H8. In order to gauge π^e , the rational expectation model predict the next period π ^e equals to ___________ inflation level . A. the current π B. short run equilibrium C. long run equilibrium D. yield of regular bond - yield of tips bond In order to gauge π^e , by applying the (rearranged) Fisher equation π^e = i − r, the predicted π^e equals to ______ inflation level. A. the current π B. short run equilibrium C. long run equilibrium D. yield of regular bond - yield of tips bond Which of the following characteristics of Phillips curve lead to a faster convergence from short run equilibrium to long run equilibrium. A. small ω B. large ω C. adapted π e forming mechanism D. rational π e forming mechanism Let us consider the following economic shock. The geopolitical conflict between Russia and Ukraine raised the oil/food prices, people expect higher inflation in the future. Thus π^e change to π ^e′ . The Phillips curve will shift _________(ABC) by __________(DEFG) amount . A. up B. down C. remain the same D. < |π^e − π ^e′ | E. = |π^e − π^e′ | F. > |π^e − π^e′ | G. none of the above Let us consider the following economic shock. The online job services like linkedin greatly reduce the time of searching and matching for labor market. As a result, natural unemployment (i.e long-run Phillips curve) Un _______________(ABC) to U ′ n . The (short-run) Phillips curve will shift to the______ (DEF) side by _________ (GHIJ) amount . A. increase B. decrease C. remain the same D. left E. right F. remain the same G. < |Un − U ′ n | H. = |Un − U ′ n | I. > |Un − U ′ n | J. none of the above

Definition Definition Relationship between the rate of unemployment and the rate of inflation that shows that the lower the initial rate of unemployment, the greater the rise in wage rate corresponding to a given rise in the rate of unemployment. The Phillips curve assumes that the ratio between prices and nominal wage rates is constant in the short run. Presented graphically, the Phillips curve shows an inverse relationship between the rate of unemployment and the rate of inflation.

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