EBK MACROECONOMICS
12th Edition
ISBN: 8220100663307
Author: PARKIN
Publisher: PEARSON
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Chapter 12, Problem 17APA
To determine
Illustrate graphically the short-run
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The Phillips Curve and Inflation - End of Chapter Problem
Recently, policy makers have debated whether an increase in the federal minimum wage, currently at $7.25 an hour, would be
good for the economy. Determine how each of the given scenarios affects the Phillips curve.
a. Policy makers announce that effective next week, the federal minimum wage will be $15 an hour. This will cause
the Phillips curve to shift upward
b. Policy makers announce that the federal minimum wage will increase to $15 an hour over the next 10 years by annual
the Phillips curve to shift upward
increases of $0.78. This will cause
c. Explain how the initial increase in the federal minimum wage for low-wage earners could lead to a wage-price spiral
throughout the economy.
The increase in wages
increases
disposable income. This in turn leads to
greater
demand, which in turn
results in higher prices.
Chapter 12 Solutions
EBK MACROECONOMICS
Ch. 12.1 - Prob. 1RQCh. 12.1 - Prob. 2RQCh. 12.1 - Prob. 3RQCh. 12.1 - Prob. 4RQCh. 12.1 - Prob. 5RQCh. 12.2 - Prob. 1RQCh. 12.2 - Prob. 2RQCh. 12.2 - Prob. 3RQCh. 12.2 - Prob. 4RQCh. 12.2 - Prob. 5RQ
Ch. 12.2 - Prob. 6RQCh. 12.2 - Prob. 7RQCh. 12.3 - Prob. 1RQCh. 12.3 - Prob. 2RQCh. 12.3 - Prob. 3RQCh. 12.3 - Prob. 4RQCh. 12.3 - Prob. 5RQCh. 12.3 - Prob. 6RQCh. 12.4 - Prob. 1RQCh. 12.4 - Prob. 2RQCh. 12.4 - Prob. 3RQCh. 12.4 - Prob. 4RQCh. 12 - Prob. 1SPACh. 12 - Prob. 2SPACh. 12 - Prob. 3SPACh. 12 - Prob. 4SPACh. 12 - Prob. 5SPACh. 12 - Prob. 6SPACh. 12 - Prob. 7SPACh. 12 - Prob. 8SPACh. 12 - Prob. 9APACh. 12 - Prob. 10APACh. 12 - Prob. 11APACh. 12 - Prob. 12APACh. 12 - Prob. 13APACh. 12 - Prob. 14APACh. 12 - Prob. 15APACh. 12 - Prob. 16APACh. 12 - Prob. 17APACh. 12 - Prob. 18APACh. 12 - Prob. 19APACh. 12 - Prob. 20APACh. 12 - Prob. 21APACh. 12 - Prob. 22APACh. 12 - Prob. 23APACh. 12 - Prob. 24APA
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- What does the Phillips Curve illustrate?A. The relationship between inflation and unemploymentB. The relationship between interest rates and investmentC. The relationship between government spending and economic growthD. The relationship between savings and consumptionarrow_forwardInflation 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. 0.9+ 4 8 10 12 Draw a point that shows the natural unemployment rate and the expected Unemployment rate (percent of labor force) inflation rate. Label it B. >>> Draw only the objects specified in the question. Draw the short-run Phillips curve that is consistent with these data. Label it. ofarrow_forwardInflation 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 Nextarrow_forward
- 9. The Phillips curve in the late 20th century The following table presents historical unemployment and inflation data in the United States for the years 1977 through 1981. Year Unemployment Rate Inflation Rate (Percent) (Percent) 1977 7.1 6.5 1978 6.1 7.6 1979 5.8 11.3 1980 7.1 13.5 1981 7.6 10.3 Plot the data for these five years on the following graph. Note: You will not be graded on how you plot the points, but plotting the points accurately on the graph will help you examine the relationship between unemployment and inflation during this period and solve the problems that follow.arrow_forwardO Macmillan Learning Use the graph to answer the question. If the economy is INITIALLY at E₂ in the short run and sells Treasure bills, then what will the new level of unemployment be? Aggregate price level 102 Macmillan Learning 100 Inflation rate 2% Inflation rate 0000 4%. (zero. 6%. 2%. 2% 0 E₁ E₂ E2 $10 $10.4 3 AD₁ 4 SRAS E₂ AD₂ Real GDP (trillions of dollars) $10 $10.4 6% AD₁ E₁ Real GDP (trillions of dollars) Unemployment ratearrow_forwardTyped plzzzz and Asaparrow_forward
- Inflation and unemployment data for Acadia can be found in the table below. Year Inflation Rate (8) Unemployment Rate (%) 2018 3.5 6.1 2019 1.4 9.3 2020 2.3 7.2 a. Draw a graph showing the Phillips curve for Acadia based on the values for inflation and unemployment in this economy from 2018 to 2020. Plot 3 points in total to draw the Phillips curve for Acadia below. Phillips Curve for Acadia Tools Phillips Curve 3 1 4 6 10 12 Unemployment Rate (%) Inflation Rate (%)arrow_forwardI need help soon as possiblearrow_forwardPlz helparrow_forward
- Plz plz plz helparrow_forwardThe following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC). PRICE LEVEL INFLATION RATE 0 3 LRAS 4 5 LRPC 9 AD O AD LRAS 6 12 UNEMPLOYMENT RATE (Percent) 15 SRPC 18 Ⓒ SRPC - LRPCarrow_forwardIn which of the following conditions is the inflation rate likely to rise and the unemployment rate likely to fall? Select one: a. stagflation b. hyperinflation C. recession O d. boomarrow_forward
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