Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 31, Problem 9IAPA
To determine
To draw:
Two short-run Phillips curves and a long-run
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Students have asked these similar questions
In the short-run you know that firms and households expect inflation of 3.6% next year. There are no
supply shocks and cyclical unemployment is 1.09%. Lambda is 0.5. With this information, what is the
inflation rate today?
Write your answer as a percentage, round at one (1) decimal, and do not write the percentage sign. Use
a minus sign if needed.
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.
Suppose that an economy is currently in equilibrium and expects inflation to be 5 percent. The natural rate of unemployment for this
economy is 4 percent. Use graphical analysis to illustrate the short-run and long-run Phillips Curves for this economy.
Instructions: Use the tools provided 'PC' and 'PCLR' to plot the short-run Phillips Curve (PC1) and the long-run Phillips Curve (PCLR) on
the graph. Plot only the endpoints of each line.
14
Tools
12
PC,
PCLR
10
8.
6
2
4
8
10
Unemployment rate (percent)
Annual rate of inflation (percent)
2.
Chapter 31 Solutions
Foundations of Economics (8th Edition)
Ch. 31 - Prob. 1SPPACh. 31 - Prob. 2SPPACh. 31 - Prob. 3SPPACh. 31 - Prob. 4SPPACh. 31 - Prob. 5SPPACh. 31 - Prob. 6SPPACh. 31 - Prob. 7SPPACh. 31 - Prob. 8SPPACh. 31 - Prob. 9SPPACh. 31 - Prob. 10SPPA
Ch. 31 - Prob. 11SPPACh. 31 - Prob. 1IAPACh. 31 - Prob. 2IAPACh. 31 - Prob. 3IAPACh. 31 - Prob. 4IAPACh. 31 - Prob. 5IAPACh. 31 - Prob. 6IAPACh. 31 - Prob. 7IAPACh. 31 - Prob. 8IAPACh. 31 - Prob. 9IAPACh. 31 - Prob. 10IAPACh. 31 - Prob. 1MCQCh. 31 - Prob. 2MCQCh. 31 - Prob. 3MCQCh. 31 - Prob. 4MCQCh. 31 - Prob. 5MCQCh. 31 - Prob. 6MCQ
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