The Phillips curve is given by T, – T; = 0.1– 2u, The inflation is a year becomes the expected inflation in the next year. The unemployment rate is kept by the fed at 4%. If the inflation in the last year was 0, then the inflation in the next year will be: А. 1% В. 2% С. 3% D. 4% Answer O A O B O D

The Phillips curve is given by T, – T; = 0.1– 2u, The inflation is a year becomes the expected inflation in the next year. The unemployment rate is kept by the fed at 4%. If the inflation in the last year was 0, then the inflation in the next year will be: А. 1% В. 2% С. 3% D. 4% Answer O A O B O D

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Each point on a Phillips curve is a different combination of: O the interest rate and investment. inflation and unemployment. O saving and disposable income. O price and quantity.
A government is considering introducing a new trade policy that would rescind existing free trade agreements and impose import tariffs. -what effect would this have on natural unemployment rate -whould this shift the phillips curve up or down?
Why does this mean? "the natural rate of unemployment" and also can elaborate more on why the longrun philips curve is vertical at the rate? why inflation is also constant in longrun equillibrium?
Problem 2: Production Model Suppose that firms produce according to the following production function: Y = At(K₂) (Lt) (N₁) ¹-a-B where At captures productivity, K, capital, L, labor, and N, land available for business use. We can define wt as wages, rk as rental rates for capital, and r as rental rates for land usage. (a) (b) Write down the firm's profit maximizing problem. Be sure to identify the vari- ables the firm can choose and which it takes as given. Are there increasing returns to labor (L)? Land (N)? Explain.
Please ONLY answer questions V and onwards
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.
28 In applying the Phillips Curve, if Congress enacts expansionary policies to reduce unemployment, the cost is Multiple Choice O O an increase in the inflation rate. a decrease in the inflation rate. an increase in productivity. a decrease in productivity.
Explain correct option and explanation of the incorrect options Note: Hand written solutions are prohibited.
IS-MP & Phillips Curvel a. Draw an economy in long-run equilibrium when the real interest rate is 3.5% using the IS-MP model as a function of the output gap. On the graph below, show the Phillips Curve as a function of the unemployment rate if the natural rate off unemployment is 4.6%. Label the initial equilibrium point A. b. Now show the effect of an increase in investment in the IS-MP and the Phillips Curve. Label this new equilibrium point B. IS-MP Phillips Curve (as a function of Unemployment)
Suppose the Phillips curve is given by the following: 2ut It Where: π = Tt-1 Suppose πt-1 = 0; at year t, authorities decide to keep unemployment rate at 4% forever. a. Compute the rate of inflation for years t+1, t+2 and t+3. b. Suppose half of labor contract of workers has been indexed. What is the new equation for the Phillips curve? Compute the rate of inflation for years t+1, t+2 and t+3. i. π = 0.1 ii. iii. Compared to your answers in problem (a), what can you conclude?
For this question, assume that the expected rate of inflation is a function of past year's inflation. Also assume that the unemployment rate has been greater than the natural rate of unemployment for a number of years. Given this information, we know that the inflation rate will be approximately equal to the natural rate of unemployment. А. the rate of inflation will approximately be equal to zero. В. C. the rate of inflation should steadily decrease. Op the rate of inflation should steadily increase over time. the rate of inflation should neither increase nor decrease. Е.