Suppose there is a 1% inflation shock, the Phillips curve beta is 2, the output gap is 1% and inflation expectations are 2%. What should be inflation in the long run? can you please show the formulas and steps for this
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Suppose there is a 1% inflation shock, the
can you please show the formulas and steps for this
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- (long-run Phillips Curve) Suppose the economy is at point D on the long-run Phillips curve shown in the accompanying exhibit. If that inflation rate is unacceptably high, how can policy makers get the inflation rate down? Would rational expectations help or hinder their efforts?Explain all options, please. The modern view of the Phillips curve suggests that a.when inflation is less than anticipated, unemployment will fall below the natural rate. b.when inflation is steady, actual unemployment will equal the natural rate of unemployment. c.systematic demand stimulus policies will be unable to affect prices in the long run. d.there will be a trade-off between inflation and unemployment in the long run.Consider the Phillips curves depicted in the graph above. The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds. If expectations of inflation are not altered by the Fed's announcement, the rate of unemployment will be ________ in the short run. a)less than 5.5 percent b)5.5 percent c)between 5.5 and 7.5 percent d)7.5 percent
- In the decade through 2020, inflation was consistently low. If people adjusted their inflation expectations to their actual inflation experience, this would shift the short-run Phillips curve down. shift the short-run Phillips curve up. shift the long-run Phillips curve to the left. Shift the long-run Phillips curve to the right.If the actual unemployment rate falls below the natural unemployment rate, how does the actual inflation rate change? The actual inflation rate ________. A. doesn't change, but the short-run Phillips curve shifts leftward B. rises up along the short-run Phillips curve C. doesn't change, but the expected inflation rate rises D. rises and the natural unemployment rate fallsIf the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.
- The inflation rate is 2 percent a year, and the quantity of money is growing at a pace that will maintain that inflation rate. The natural unemployment rate is 7 percent, and the current unemployment rate is 9 percent. In what direction will the unemployment rate change? How will the short-run Phillips curve and the long-run Phillips curve shift?Consider the short-run Phillips curve. If the actual unemployment rate falls below the full employment rate of unemployment, it should be expected that: the Phillips curve would shift downwards wages would fall the natural rate of unemployment would fall the inflation rate would increaseThe diagram opposite shows two short-run Phillips curves (PC0 and PC1). PC0 corresponds to a situation in which workers expect no inflation. Explain why this new position for the economy is untenable in the long run. (e) Towards what long-run equilibrium level of unemployment will the economy tend?
- According to the Phillips curve, the inflation rate depends on all of these EXCEPT: a. previously expected inflation. b. an exogenous supply shock. c. the real interest rate. d. the deviation of output from its natural rate.What relationship does the short-run Phillips curve show? The short-run Phillips curve shows a _______ relationship between the unemployment rate and the _______. A. positive; interest rate B. negative; interest rate C. negative; inflation rate D. positive; inflation rate Thanks