The graph shows the short-run and long-run Phillips curves. The current inflation rate is 5 percent a year. Inflation rate (percent per year) 12.5 LRPC The Fed announces that it will increase the money growth rate so that the inflation rate will rise to 6 percent a year. 10.0- If no one believes the Fed and expected inflation remains at 5 percent a year, explain the effect of the Fed's action on inflation and unemployment next year. Choose the correct statement. 7.5- 5.0- O A. The inflation rate rises and the unemployment rate will increase in a movement up the long-run Phillips curve. SRPC O B. The unemployment rate will decrease but inflation will not change. 2.5- OC. Nothing will happen. It takes more than a year for unemployment and inflation to begin to respond to a speed up in money growth. 0.0- O D. The inflation rate rises and the unemployment rate decreases in a movement up the short-run Phillips curve. 10 Unemployment rate (percent of labor force)

The graph shows the short-run and long-run Phillips curves. The current inflation rate is 5 percent a year. Inflation rate (percent per year) 12.5 LRPC The Fed announces that it will increase the money growth rate so that the inflation rate will rise to 6 percent a year. 10.0- If no one believes the Fed and expected inflation remains at 5 percent a year, explain the effect of the Fed's action on inflation and unemployment next year. Choose the correct statement. 7.5- 5.0- O A. The inflation rate rises and the unemployment rate will increase in a movement up the long-run Phillips curve. SRPC O B. The unemployment rate will decrease but inflation will not change. 2.5- OC. Nothing will happen. It takes more than a year for unemployment and inflation to begin to respond to a speed up in money growth. 0.0- O D. The inflation rate rises and the unemployment rate decreases in a movement up the short-run Phillips curve. 10 Unemployment rate (percent of labor force)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.
In the graph you've just explored, what is the inflation rate if the unemployment rate is 8 percent? _____ percent per year >>> Answer to 1 decimal place. Thanks Screenshot attached
In this Decision Point you learned a little about inflation and inflation expectations. Apply what you learned from this decision point to the following questions. Erica makes $25 per hour. Erica receives a 1.9%1.9% raise and inflation is 2.5%2.5% what happens to her real wage? Her real wage: rises by 1.9%1.9% rises by 2.5%2.5% falls by 0.6%0.6%. does not change.
3. A nation consists of 2 political parties, Democrats and Republicans. The Democrats care more about unemployment than Republicans, and Repuhlicans care more about inflation than Democrats. When Democrats hold power, they choose an inflation rate, tp and when the Republicans hold power, they choose an inflation rate, TR. Phillips's curve is: T; = n - 1.5 (u - Un). We assume that: Tp > TR.Natural unemployment rate: Un = 5%. An election is about to be held. Assume that expectations about inflation for the coming year are formed before the election. (Essentially, this assumption means that wages for the coming year are set before the election.) Moreover, it is assumed that the Democrats and Republicans have equal chance of winning the election. 1) Solve for expected inflation, in terms of tpand TR. 2) Suppose the Democrats win the election and implement their target inflation rate, Tp. If T, = 3.2% and TR = 1.5%. Solve for the unemployment rate ult. 3) Suppose the Republicans win the…
32 There is a new central bank president who wants low inflation much more than the previous president did. According to the Augmented Phillips Curve Model, in this situation, which of the following would be the most help in keep unemployment from rising in the sort run? a.People know the central bank president's true desires and believe he will stay in office for a long time b.Peoples' wage wage contracts are long-lasting. c.People know the central bank president's true desires and believe that he will only be in office for a short time. d.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for a short time. e.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for a
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Draw a Phillips curve graph here that shows a natural rate of unemployment of 4% and a current inflation rate of 2%. Make sure your lines and axes are labeled and your graph is complete! Use your knowledge of The Phillips Curve to answer the following questions. The threat of future inflation: makes people reluctant to loan money for long periods. makes people eager to loan money for long periods. has no effect on loaning money. increases the value of money paid back in the future. makes people reluctant to borrow money for long periods. According to the short-run Phillips Curve, there is a trade-off between: interest rates and inflation. the growth of the money supply and interest rates. unemployment and economic growth. inflation and unemployment. economic growth and interest rates. Which of the following is true of the long-run Phillips curve? it shows there is a trade-off between unemployment and inflation. it is positively sloped when the inflation rate exceeds…
Inflation at lowest rate in 5 years Inflation rate (percent per year) In September, inflation in the United Kingdom fell to 1.1% a year, its lowest in 5 years. Analysts expected an inflation rate of 1.3% a year. 1.7- Source: The New York Times, October 13, 2009 With the unemployment rate at 8 percent and the natural unemployment rate at 6 percent, sketch the short-run Phillips curve and mark on your graph the point which shows the situation in September. Label the point A. 1.5- 1.3- The unemployment rate is 8 percent and the natural unemployment rate is 6 percent. 1.1- Draw a point that shows the unemployment rate and the inflation rate in September. Label it A. Draw a point that shows the natural unemployment rate and the expected inflation 0.9 rate. Label it B. 10 12 Unemployment rate (percent of labor force) Draw the short-run Phillips curve that is consistent with these data. Label it. >>> Draw only the objects specified in the question. Selected: Delete Clear none Next
The Fed increases the amount of OMO purchases: a)Inflation increases b)Inflation decreases c)Inflation stays the same d)Can't tell
3. An economy has the following equation for the Phillips curve: n = En – 0.5(u – 6) People form expectations of inflation by taking a weighted average of the previous two years of inflation: En = 0.7 T.1 + 0.3 r.2 Okun's law for this economy is: (Y - Y.)/ Y.j= 3.0 – 2.0 (u-u.1) The economy begins at its natural rate of unemployment with a stable inflation rate of 5 percent. e. On the same graph you used in part (b), graph the short-run tradeoff the economy faces at the end of this 10-year period. Label the point where the economy finds itself as point C. (Again, use numerical values.) f. Compare the equilibrium before the recession with the new long-run (period ten) equilibrium. How much does inflation change? How many percentage points of output are lost during the transition? What is this economy's sacrifice ratio? 6% =E * -0.5 / U-c) ス E 大 - d.s u+3 A: (EX + 3 ) + (-o.so) CEX +3 ) - 0-5 u (6,5) Phillips curve 2. 1 2 3 4 unemployment (u). C D F G H K 1 Variables Year 1 Year 2 Year 3…