The long-run Phillips Curve describes: The relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience. An increase in expected inflation will cause nominal wages to rise, shifting both SRAS and the Phillips Curve up. That there is a predictable negative relationship between the output gap and the unemployment rate but it is not one to one. The negative short-run relationship between the unemployment rate and the inflation rate.

The long-run Phillips Curve describes: The relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience. An increase in expected inflation will cause nominal wages to rise, shifting both SRAS and the Phillips Curve up. That there is a predictable negative relationship between the output gap and the unemployment rate but it is not one to one. The negative short-run relationship between the unemployment rate and the inflation rate.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Kindly answer E-H. Thank you.
Which of the following is true about the Phillips curve? The empirical relationship between unemployment and inflation in the US disappeared after the 1970s. This means that the theoretical Phillips curve does not represent the world well. For a researcher to identify the theoretical Phillips curve from empirical data, the economy must be subject to supply shocks. The empirical Phillips curve implies that a government must choose between either low unemployment and high inflation or high unemployment and low inflation. When inflation expectations adjust, the negative empirical correlation between inflation and unemployment might disappear.
Assume an imaginary country called Narnia. Firms in this country heavily rely on natural gas as a raw material to produce the final output. Assume a sudden fall in the price of natural gas. This shock is an event that directly affects firms' costs of production and thus the price that they charge. Describe the effects of this shock on the aggregate supply curve and on the Phillips curve of the economy of Narnia. Use a diagrammatic analysis to provide your answer.
Explain what happens to the economy if there is a temporary consumption boom that lasts for one period and the central banks keep the nominal interest rate unchanged. Include the Phillips curve and allow the economy to evolve over time.
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Discuss why the expectations-augmented Phillips curve can explain what has happened to the inflation-unemployment trade-off since the 1970s.
Based on your understanding of the Phillips curve, explain what happens to actual inflation (relative to expected inflation) when the actual unemployment rate is either above or below the natural rate of unemployment.
Consider the short-run Phillips curve. If the actual unemployment rate falls below the full employment rate of unemployment, it should be expected that: the Phillips curve would shift downwards wages would fall the natural rate of unemployment would fall the inflation rate would increase
An increase in aggregate demand, for a given short-run aggregate supply curve, should lead to which of the following results relating to the Phillips curve? A move onto the vertical long-run Phillips curve An increase in both unemployment and inflation An inward shift of the Phillips curve as inflationary expectations decrease A move up the short-run Phillips curve, with less unemployment and more inflation An outward shift in the Phillips curve as inflationary expectations immediately increase
According to Modern Phillips Curve Theory, an increase in the sensitivity of inflation to changes in real GDP results in: (a) lower Durbin-Watson statistics across econometric estimations; (b) a movement to the left of the long-run aggregate supply curve; (c) decreased employment volatility over several economic cycles; (d) more inflation
Use the following information to answer the next two questions. Consider the Phillips curve with e=1.2, u*-0.06, and n--0.06. Suppose that uo-u*. Suppose the current government pressures the RBA to bring the economy to an unemployment rate of 0.03 for the next period. With adaptive expectations, what inflation rate should the RBA target? (enter "x" without the quotes if there is not an inflation rate that can produce the target unemployment.) Report your ans as a decimal fraction up to two decimal points.