The natural unemployment rate is 6 percent and the expected inflation rate is 10 percent a ear. raw the long-run Phillips curve. Label it LRPC- Draw the short-run Phillips curve. Label it SRPCo- raw a point at the natural unemployment rate and the expected inflation rate. Label it 1. Now the natural unemployment rate rises to 9 percent with no change in the expected flation rate. Draw and label LRPC₁. Draw and label SRPC,. raw a point at the natural unemployment rate and the expected inflation rate. Label it 2. 20- 16- 12- 8- Inflation rate (percent per year) 2.0 4.0 6.0 8.0 10.0 12.0 Unemployment rate (percentage of labor force) >>> Draw only the objects specified in the question. 0.0

The natural unemployment rate is 6 percent and the expected inflation rate is 10 percent a ear. raw the long-run Phillips curve. Label it LRPC- Draw the short-run Phillips curve. Label it SRPCo- raw a point at the natural unemployment rate and the expected inflation rate. Label it 1. Now the natural unemployment rate rises to 9 percent with no change in the expected flation rate. Draw and label LRPC₁. Draw and label SRPC,. raw a point at the natural unemployment rate and the expected inflation rate. Label it 2. 20- 16- 12- 8- Inflation rate (percent per year) 2.0 4.0 6.0 8.0 10.0 12.0 Unemployment rate (percentage of labor force) >>> Draw only the objects specified in the question. 0.0

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Five O Otner Bo Inflation VPC 4. 3 1. ye Output Figure 2 The Vertical Phillips Curve Figure 2 represents an economy in which the target rate of inflation is 3%. In the absence of any policy intervention, which one of the following statements correctly describes the future direction of inflation in the economy if it is at point Z on the diagram. Select one: O Inflation will rise further away from its target level. O Inflation will not change. O Inflation will rise towards its target level. O Inflation will fall further away from its target level. O Inflation will fall towards its target level. MacBook 00 DD 000 F4 F5 F6 F7 F8 F9 F10 云

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The long-run Phillips Curve describes: The relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience. O 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 Phillips Curve
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Do the expected inflation rate and natural unemployment rate remain constant along the short-run Phillips curve? Along the short-run Phillips curve, _______. A. the expected inflation rate rises as the natural unemployment rate rises B. the expected inflation rate is constant and the natural unemployment rate varies C. the expected inflation rate and the natural unemployment rate are constant D. the expected inflation rate rises as the natural unemployment rate falls thank ss
The following graph shows a short-run Phillips curve for a hypothetical economy. Show the short-run effect of a contractionary monetary policy by dragging the point along the short-run Phillips curve (SRPC) or shifting the curve to the appropriate position. 12 SRPC 6:31 F 4/29/202 INFLATION RATE (Percent) 11 10 9 8 3 H CHIII I SRPC а J H a I
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.
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…
From 2008-2009 the Federal Reserve created a very large increase in the money supply. According to the short-run Phillips curve this policy should have raised inflation and unemployment. Oraised inflation and reduced unemployment. O reduced inflation and raised unemployment. O reduced inflation and unemployment.
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What occurs when the natural unemployment rate increases? A. The short-run Phillips curve doesn't change and the long-run Phillips curve shifts rightward. B. The long-run Phillips curve doesn't change and the short-run Phillips curve shifts upward. C. The long-run and short-run Phillips curves shift rightward and the expected inflation rate rises. D. The long-run and short-run Phillips curves shift rightward and the expected inflation rate doesn't change. tha nks