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1) Explain the trade off between inflation and output in
2)Exlain why the government may/may not be able to just randomly implement policies to increase ouput.
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- If, over time, wages and salaries on average rise at least as fast as inflation, why do people worry about how inflation affects incomes?What has been a typical range of inflation in the U.S. economy in the last decade or so?Would you expect to see long-run data trace out a stable downward-sloping Phillips curve?
- Suppose that people expect inflation to be 3 percentbut that, in fact, prices rise by 5 percent. Describehow this unexpectedly high inflation would help orhurt the following:a. the governmentb. a homeowner with a fixed-rate mortgagec. a union worker in the second year of a laborcontractd. a college that has invested some of its endowmentin government bondsOil prices are on track to reach $100 a barrel this month for the first time in 2023 after surging by almost 30% sinceJune, after Russian and Saudi Arabian production cuts and rising demand from China.With many industries being heavily reliant on energy and transportation, what type of inflation would this leadto in South Africa?A. Demand-pull inflationB. Cost-push inflationC. StagflationD. HyperinflationWhat is one of the potential effects of the aforementioned inflation on the South African economy?A. Decreased purchasing power of money.B. Increased consumer savings.C. Reduced interest rates on loans.D. Higher demand for imports.Two main macroeconomic concerns are the problems of inflation andunemployment.a. What are the social costs of inflation? Explain TWO of them? b. What is natural rate of unemployment? Explain the TWO main causesof natural rate of unemployment. With reference specifically to ONEof these causes, suggest ONE practical government policy that reducesthe natural rate of unemployment.
- What causedthe Great Inflation of the 1970s, and why has inflation been so much lowerin recent decades?Julia is a macroeconomist who works as a policy maker for a European government. She believes that policy makers can choose from a menu of inflation and unemployment combinations and that the non-accelerating inflation rate of unemployment (NAIRU) does not exist. What school of thought best matches Julia's viewpoint? 1)Hysteresis Keynesian 2)Earlier monetarist 3)Persistence Keynesian 4)Old Keynesian 5)New classical and OECD economistWill the following lead to cost-push or demand-pull inflation? (5%)(a) The discovery of a large and rich vein of gold in the banks of Lagan (b) More militancy in wage demands by trades unions (c) A fall in output as a result of a prolonged lockdown of business while the government pays for salaries of furloughed workers (d) A higher tax on microchips (e) Increasing industrial concentration leading to oligopolistic industrial structures
- Suppose that in 2019 there is a sudden, unanticipated burst of inflation. Consider the situations faced by the following individuals. Who gains and who loses? Explain why?a. A homeowner whose wages will keep pace with inflation in 2019 but whose monthly mortgage payments to a savings bank will remain fixedb. An apartment landlord who has guaranteed to his tenants that their monthly rent payments during 2019 will be the same as they were during 2018c. A banker who made an auto loan that the auto buyer will repay at a fixed rate of interest during 2019d. A retired individual who earns a pension with fixed monthly payments from her past employer during 2019Pay rises offered despite Bank of England plea for restraint over inflationEmployers are set to increase wages at their fastest pace in almost a decade this year despite a pleafor pay restraint from the governor of the Bank of England.Some 46 per cent of companies struggling to keep hold of workers have already raised the pay ofincumbent staff, according to research, and 40 per cent are planning to do so in future.Source: https://www.thetimes.co.uk/article/pay-rises-offered-despite-bank-of-england-plea-for-restraintover-inflation-xhf8dbn5bAccessed: 14/02/222Which of the following macroeconomic objectives is being pursued by the Bank of England? a) Price stabilityb) Full employmentc) Economic growthd) Wage rate stabilitySuppose that an economy has the Phillips curvep=p-1 - O.S(u - 0.06),a) What is the natural rate of unemployment?b) Graph the short-run and long-run relationships between inflation and unemployment.c) How much cyclical unemployment is necessary to reduce inflation by S percentage points?d) Using Okun's law, compute the sacrifice ratio e.e)Inflation is running at 10 percent. The Fed wants to reduce it to 5 percent. Give Iwoscenarios that will achieve that goal.
