Suppose the Phillips curve is and the Aggregate Demand curve is πt = πt-1+Yt + Ot 3t = at — 5(Tt – 0.02) - where at = Ot = 0 in the steady state. (a) Calculate the steady state values of output and inflation in this economy. (b) Calculate the short- and long-run responses of the economy to the following shocks (use a table to report your answers, as well as show them graphically on the AD-AS graph, as well

Suppose the Phillips curve is and the Aggregate Demand curve is πt = πt-1+Yt + Ot 3t = at — 5(Tt – 0.02) - where at = Ot = 0 in the steady state. (a) Calculate the steady state values of output and inflation in this economy. (b) Calculate the short- and long-run responses of the economy to the following shocks (use a table to report your answers, as well as show them graphically on the AD-AS graph, as well

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Draw and properly label an AD-AS model to show Keynesian, intermediate, andneoclassical zones (6%). Then, briefly explain the levels of unemployment, inflationand real GDP in each zone, and also confirm whether all three goals of a macroeconomy are being achieved in each zone. (14%)
The Short-Run Phillips Curve given by T = E (x) – 0.4 (u – 10) + v Suppose that the economy has adaptive expectations and no inflation shocks. If inflation goes down by 3.3 percentage points a year from today, what is the unemployment rate one year from now? Round your answer to the nearest two decimal place. Write your answer in percentage terms so if your answer is 10%, write 10.
Q: Let's consider a long term model with sudden demand shock. The demand function is:(M/P)D=a,+aY-a,(r+re). a, refers to the shock. (a)For example, one day the exchange cost between bond and physical money suddenly becomes zero. Suppose people's expenditure is constant, how will the demand for money change? (hint: the demand for cash) (b)The conditions are the same as (a). In the long run, how will the price level P change?
Can you please help me with D) and E) please and thanks.
Kindly answer A-D. Thank you.
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In a certain economy, the Dynamic Aggregate Supply (DAS) line is represented by the function = - π₁ = Ę ₁ = ₁ π + α ( Y₁ − Ÿ) + D and the inflation expectations formation mechanism is adaptive, that is, E₁+1 Absent a supply shock (v₁ = 0), in a figure representing period t inflation rate, π, on the vertical axis, and period t output, Y₁, on the horizontal axis, the period t DAS line will pass through the pair of points, : OA. (-1) B. (α, Y) ○ C. (Y) D. (πt, Yt)
The Phillips curve in Lowland takes the form of π = 0.04 – 0.5 (u – 0.05), where π is the actual inflation rate and u is the unemployment rate. The Phillips curve in Highland takes the form of π = 0.08 – 0.5 (u – 0.05). The current unemployment rate in both countries is 9 percent (0.09). Explain the similarities in the Phillips curves in Highland and in Lowland.
MA4. 13. If the equation for a country's Phillips curve is π = 0.05 – 0.8(u – 0.05), where π is the rate of inflation and u is the unemployment rate, what is the short-run inflation rate when unemployment is 3 percent (0.03)? A) .066 B) -.056 C) -.066 D) .056 11. The aggregate supply equation is Y = Y + α(P – EP). Assume that Y is 2,000, α = 200, P = 1.12 and EP = 1.00. What is the value of Y? A) 2,232 B) 2,024 C) 2,400 D) 2,012 9. If policymakers announce in advance how policy will respond to various situations but then renege on their announcements, this a problem of: A) policy by rule. B) policy by discretion. C) time inconsistency of policy. D) monetary policy. 10. According to the sticky-price model, output will be above the natural level if: A) firms expect a high price level and the demand for goods is high. B) the proportion of firms with flexible prices equals the proportion of firms with sticky prices. C) the price level is above the…
What happened first was a major policy-induced supply shock. The lockdown forced firms in several directly affected sectors, from restaurants to hotels to airlines, to halt (or at least to drastically decrease) supply. In contrast to other supply shocks analyzed earlier in the book, many firms had no choice other than to stop or decrease production. As a result of sharply lower output, and thus lower income, and of increased uncertainty, this shock had a major effect on demand, not just in the sectors directly affected by the lockdown, but also in the non-affected sectors. Thus, the outcome was a combination of a supply shock and a sharp demand response. In that context, the role of macroeconomic policy was twofold. First: While it could not do much to increase output in the affected sectors, it needed to protect the firms in those sectors from going bankrupt and the workers who lost work from going hungry. Second: It needed to limit the effect of lower demand in the non-affected…