Q1 A) Illustrate the short-run and long-run impact of the Covid-19 pandemic (unexpected demand shock) to Thailand using both the AD-AS model and the Phillips curve. Assume the Thai economy starts at full employment. B) How would an adverse supply shock change the short-run tradeoff between inflation and unemployment? Illustrate your answer using a Phillips curve diagram.

Q1 A) Illustrate the short-run and long-run impact of the Covid-19 pandemic (unexpected demand shock) to Thailand using both the AD-AS model and the Phillips curve. Assume the Thai economy starts at full employment. B) How would an adverse supply shock change the short-run tradeoff between inflation and unemployment? Illustrate your answer using a Phillips curve diagram.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider an economy for which wage and price inflation are initially 3% under a zero output gap. Calculate price inflation by the end of the current period under a new output gap of 6%. (Hint: you need to use the Phillips curve equation)
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Kindly answer A-D. Thank you.
Assume that the price level in an economy is stable with expected inflation initially equal to 3% in period 0. Further assume the economy is then hit by an expansion at the beginning of period 1, and employment remains at a constant high level until the beginning of period 4. With ‘time period’ on the xaxis and ‘inflation rate’ on the y-axis: (i) Plot the path of the bargaining gap (assume it is equal to 1%), inflation and expected inflation from period 1 to the end of period 4. (ii) Provide some reasons for why the bargaining gap might disappear after period 4, and state any other assumptions you are making. (iii) Explain how an increase in the central bank’s policy interest rate would affect the exchange rate through the market for financial assets (such as government bonds). What impact would this have on aggregate demand?
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Second wave of Coronavirus infection has a potential effect on GDP growth. The government tries to use monetary policy to alleviate the problem. Use the Keynesian’s short-run and long-run Phillips curves to explain whether an expansionary monetary policy can lower the natural rate of unemployment temporarily or permanently. Also, draw three graphs: the labor market, AD-AS, and Phillips curve diagram
A. What assumptions did Thomas Sargent make when he claimed that inflation is always and everywhere a fiscal phenomenon?" B. Why is it appropriate in the book's short-term model for the author to use the Phillips Curve as an Aggregate Supply curve? Does it capture the working of the labor market as well as an AS curve based, say, on sticky wages? C. Provide an example of the book's short-run model being based on "microfoundations."
Kindly answer E-H. Thank you.
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