Q3 - Modules L7. Inflation and the Phillips Curve[Suggested word count for Q3: 400 to 500 words]In 2021, (almost after the COVID-19 related lockdowns were relaxed in Australia) Australianconstruction industry was facing high demand resulting into a boom in the construction ofnew housing. This can partly be attributed to the generous economic stimulus packagesgiven by the government (for instance, see the articles below).●Australia launches $470 million stimulus package for construction sectorhttps://www.reuters.com/article/us-health-coronavirus-australia-idUSKBN23B02XPost Pandemic Construction Boomhttps://slattery.com.au/wp-content/uploads/2021/12/Slattery-National-Market-Update-December-2021.pdfUsing the AD and Phillips curve model, show the state of the Australian economy assuminghaving a stable target inflation of 2% prior to COVID-19. Now, in the same model, show andexplain the impact of the above-mentioned construction boom on employment andinflation levels in Australia resulting in the current state of the economy (2022- 2023).

The Phillips curve is an economic concept that proposes a negative correlation between the…

Using the AD and Phillips curve model, show the state of the Australian economy assuming having a stable target inflation of 2% prior to COVID-19. Now, in the same model, show and explain the impact of the above-mentioned construction boom on employment and inflation levels in Australia resulting in the current state of the economy (2022- 2023).

Using the AD and Phillips curve model, show the state of the Australian economy assuming having a stable target inflation of 2% prior to COVID-19. Now, in the same model, show and explain the impact of the above-mentioned construction boom on employment and inflation levels in Australia resulting in the current state of the economy (2022- 2023).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Suppose that the government is considering enacting an expansionary policy in 2023 that would shift aggregate demand in 2024 from ADAADA to ADBADB. This would cause a (move along , shift of) the short-run Phillips curve, resulting in (increase, decrease) in the inflation rate and (increase, decrease) in the unemployment rate.
The table below shows unemployment and inflation data in Country Y after a shift in aggregate demand. Period 2021 2022 Unemployment Rate 2% 5% Inflation Rate 8% 4% A. Draw a correctly labeled graph of the short run Phillips Curve for Country Y. Show the actual unemployment and inflation rate for both years. Label the Phillips Curve as SRPC. B. Now, the short run aggregate supply curve has shifted left. i. Identify one cause that would shift short run aggregate supply to the left. ii. On your graph in Part A, show how this shift would impact the short run Phillips Curve.
(a) What events of the 1970s and 1980s made economists believe that the shortrun relationship between inflation and unemployment was unstable (not fixed and permanent)? (b) Explain, using a diagram(s) and the concept of stagflation, the relationship between shifts in the SRAS curve and the position of the short-run Phillips curve.
Consider an economy with a natural unemployment rate, u, of 7%. The expectations-augmented Phillips curve is: 1= - 0.5(u -ū) Assume that Okun's Law holds so that a 1 percentage point increase in the unemployment rate maintained for one year reduces GDP by 2% of full employment output. Note: Okun's Law can be expressed as: *--2(u-ü) What is the long-run Phillips curve: OA. Inflation rate 8- OB. OC. O D. none of the answers is correct Inflation rate Inflation rate 6- 6- 6-
As with demand and supply analysis, changes in the economy can cause both shifts of and movements along the short-run Phillips curve. Which of the following would cause a shift of the short-run Phillips curve? Check all that apply. An increase in government spending A decrease in short-run aggregate supply An increase in the expected inflation rate
Consider an economy producing at Yo = 0 and ū = 1/4. The inflation rate at t = 0 is TO = 3%. Now, suppose the economy is hit by an inflation shock ō1 = ō2 = 3%. The shock is temporary and ōt = 0 for t > 2. For the duration of the inflation shock, the economy is in a recession with Y = Ý2 = -1%, which ends with Y3 = 0. Based on this information, you know that the inflation rate T3 is percent. 8.5 8.5 (with margin: 0)
Assume that a country's economy is in equilibrium. a) () Using a correctly labeled AD/AS graph, show how an increase in the price of gasoline, an important input of production, will affect the following in the short run. (i) Real output :- (ii) Price level-Using a correctly labeled graph, show the same effect on the Phillips curve. () Central bank of the country responds to the higher price of oil by increasing the money supply. (i ) ()Explain the process by which the increase in the money supply will affect the aggregate demand in the short run. (ii) (Indicate on the AD/AS graph, how the increase in the money supply will affect real output and the price level. d) () Now assume that instead of using monetary policy in response to the gasoline price increase, the government reduces business taxes, which results in lower production costs. Using a new correctly labeled graph, show the effect of the reduction in business taxes on the following. (i) () Real output - (ii) () Price levele) (…
There is an on‐going debate on how unemployment benefits affect the unemployment rate. In the context of the Mortensen‐Pissarides model, unemployment benefits are represented by the variable b. Explain carefully how an increase in b affects each equilibrium condition (Beveridge curve, vacancy supply condition, and wage setting curve.) How is the steady‐state unemployment rate impacted by an increase in b? Use the simulation tool here, https://www.briancjenkins.com/dmp‐model/simulation‐tool.html, to check your answer.
Two potential causes of inflation above target in the AD-AS model: Demand-pull inflation: This occurs when aggregate demand (AD) increases more than the long-run aggregate supply (LRAS). In the AD-AS diagram, this would be represented by a rightward shift of the AD curve. The result is a higher price level and real GDP beyond the long-run macroeconomic equilibrium level. Cost-push inflation: This occurs when the short-run aggregate supply (SRAS) curve shifts to the left due to increased production costs, such as rising wages or input prices. In the AD-AS diagram, this would be represented by a leftward shift of the SRAS curve. The result is a higher price level and a reduction in real GDP. how do i graph this information in an ad-as diagram
The Phillips Curve is given as; n = T° + (m + z) – au Now, consider the case where the inflation expectations are de-anchored. Assume the expected inflation n° is based on last year's inflation rate t-1 (nº = Ttt-1) 1.1: Suppose Tt-1 = 3%. What would be the unemployment rate (U¿) when T = 4%? %3D 1.2: Suppose the production function is given by: Y = N = L(1 – uz) What happens to the potential output when the markup increases?
Homework: Chapter 27 1. Aggregate demand, aggregate supply, and the Phillips curve In the year 2020, aggregate demand and aggregate supply in the fictional country of Bartak are represented by the curves AD20 and AS on the following graph. The price level is 102. The graph also shows two possible outcomes for 2021. The first potential aggregate demand curve is given by the ADA curve, resulting in the outcome illustrated by point A. The second potential aggregate demand curve is given by the ADB curve, resulting in the outcome illustrated by point B. PRICE LEVEL 106 AS 107 106 B 105 104 AD 2020 103 102 101 19V 100 D 10 AD OUTPUT (Trillions of dollars) ADB 12 14 (?) Suppose the unemployment rate is 6% under one of these two outcomes and 3% under the other. Based on the previous graph, you would expect to be associated with the lower unemployment rate (3%). outcome B outcome A emand is high in 2021, and the economy is at outcome B, the inflation rate between 2020 and 2021 is Based on your…
Suppose the Phillips curve in Country A is estimated to be ??=???−0.25(??−?∗?)πt=πte−0.25(ut−ut∗)(supplied in picture) The natural rate of unemployment in the year 2020 equals 3%. Inflation in the year 2020 is expected to be around 1%. The Okun’s coefficient in Country A equals 2. The central bank of Country A is considering three possible monetary policy scenarios for the year 2020. Scenario 1: the central bank performs a monetary contraction, and the inflation rate becomes 0.5%. Scenario 2: the central bank performs a monetary expansion, and the inflation rate becomes 1.5%. Scenario 3: the central bank keeps monetary policy unchanged, and the inflation rate matches expected inflation and equals 1%. For each of these policy scenarios, 1) Determine the corresponding rate of cyclical unemployment in 2020 2) Determine the actual unemployment ??ut that would result in 2020 3) Use Okun’s law to determine the corresponding…