Principles of Economics, 7th Edition (MindTap Course List)
Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 35, Problem 1PA
To determine

Illustration of actual and expected inflation on a Phillips curve.

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Suppose the natural rate of unemployment is 6%. On one graph, draw two Phillips curves that can be used to describe the four situations listed below. Label the point that shows the position of the economy in each case: a. Actual inflation is 5% and expected inflation is 3%. (1%) b. Actual inflation is 3% and expected inflation is 5%. (1%) c. Actual inflation is 5% and expected inflation is 5%. (1%) d. Actual inflation is 3% and expected inflation is 3%. (1%)
Suppose that the government in the economy of the diagram below regards 9 percent unemployment as unacceptable. If the government insists on reducing the unemployment rate from 9 percent to 7 percent, regardless of the consequences, thena. pressure will build in the economy to continuously reduce the rate of inflation.b. the long-run Phillips curve becomes horizontal, freezing the rates of inflation and unemployment.c. the inflation rate will increase but the unemployment rate will stay at 7 percent.d. in the long run the rate of unemployment remains unchanged, but inflation will likely accelerate.   Give explanations for the correct one
Inflation and unemployment data for Acadia can be found in the table below. Year 2018 2019 2020 ion Rate (%) 5 Inflation Rate (%) + 4.7 2.6 3.5 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. Plot the plotting points in the order 2018, 2020 and then 2019. Unemployment Rate (%) Phillips Curve for Acadia 5.7 8.9 6.8 Tools Phillips Curve Ⓡ
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