context of an economy's short-run trade-off? A) The relationship between fiscal policy and international trade balances. B) The inverse relationship between the level of unemployment and the rate of inflation in an economy. C) The correlation between exchange rates and export volumes. D) The direct relationship between technological advancements and increases in labor productivity. Provide valuable answer without using any ai tool. Thanks

context of an economy's short-run trade-off? A) The relationship between fiscal policy and international trade balances. B) The inverse relationship between the level of unemployment and the rate of inflation in an economy. C) The correlation between exchange rates and export volumes. D) The direct relationship between technological advancements and increases in labor productivity. Provide valuable answer without using any ai tool. Thanks

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A. What assumptions did Thomas Sargent make when he claimed that inflation is always and everywhere a fiscal phenomenon?" B. Why is it appropriate in the book's short-term model for the author to use the Phillips Curve as an Aggregate Supply curve? Does it capture the working of the labor market as well as an AS curve based, say, on sticky wages? C. Provide an example of the book's short-run model being based on "microfoundations."
Consider the expectations adjusted Phillips’s curve and assume that expected inflation is given by πet = πt-1. Suppose that unemployment is initially equal to the natural rate and that π=10%. The central bank decides that inflation is too high and that, starting in year t, it will maintain the unemployment rate 1% point above the natural rate until the inflation rate has decreased to 2%. (a) What is the sacrifice ratio in this economy [Hint: the sacrifice ratio is the percentage of a year’s excess unemployment needed to reduce inflation by 1%. For a Philips curve given as πet − πt −1 = −α (ut − un ), the sacrifice ratio is 1/α]? (b) Compute the rate of inflation for year t, t+1, t+2, t+3, …, t+8. (c) For how many years must the central bank keep the unemployment rate above the natural rate of unemployment? Is the implied sacrifice ratio consistent with your answer to (a)?
A government is considering introducing a new trade policy that would rescind existing free trade agreements and impose import tariffs. -what effect would this have on natural unemployment rate -whould this shift the phillips curve up or down?
“Households decide to save a larger share of their income will shift aggregatedemand curve upward because higher saving will boost investment which inturn increase the demand for investment goods.” Do you agree with thestatement? Explain your choice. e. Graphically derive short run Phillips curve with the help of aggregate demand and supply model.
The Philips curve in an economy is given by a = Επ- 0.5 (u - 6). Assume that the economy starts out at its natural unemployment rate and expected inflation Ex = 5.25%. If output decreases by 2%, using Okun's Law and the Phillips curve relation, what is actual inflation π ?
Consider the expectations augmented Phillips curve model. Suppose that we are starting from long - runequilibrium with a central bank which cares a lot about unemployment and relatively little about inflation.a) Draw and carefully label the graph of this situation. b) Explain where the Phillips curve comes from inthis model. c) Explain why the equilibrium you specify is the only Nash equilibrium. d) Now suppose that anew central bank governor is appointed who cares a lot about inflation and relatively little aboutunemployment. Redraw your graph twice, once showing what happens if private agents know the newgovernor's preferences and again showing what happens if private agents mistakenly believe that thenew governor has the same preferences as the old governor. Explain clearly why the outcome is differentin the two cases.
Assume that the price level in an economy is stable with expected inflation initially equal to 3% in period 0. Further assume the economy is then hit by an expansion at the beginning of period 1, and employment remains at a constant high level until the beginning of period 4. With ‘time period’ on the xaxis and ‘inflation rate’ on the y-axis: (i) Plot the path of the bargaining gap (assume it is equal to 1%), inflation and expected inflation from period 1 to the end of period 4. (ii) Provide some reasons for why the bargaining gap might disappear after period 4, and state any other assumptions you are making. (iii) Explain how an increase in the central bank’s policy interest rate would affect the exchange rate through the market for financial assets (such as government bonds). What impact would this have on aggregate demand?
Assume that inflation falls significantly below expectations. Diagramboth the short-run and long-run effects on employment using a PhillipsCurve diagram. What changes in this model to allow the return to long-runequilibrium?
The importance of using rather than saving your ammunition in the presence of the zero lower bound. Suppose inflation is described by the accelerations Phillips curve, and that output is determined by a simple IS curveInitially, the central bank is setting the nominal interest rate at a strictly positive level: i(0) > 0. Assume(a) Suppose the central bank keeps i constant at i (0). Sketch the behavior of inflation and output over time.(b) Suppose the central bank keeps i constant at i (0) until some time when bπ(t) < 0, and then permanently reduces i to zero. Sketch the behavior of inflation and output over time.(c) Suppose the central bank permanently reduces i to zero at t = 0. Sketch the behavior of inflation and output over time.(d) Explain your results intuitively.
Describe the Phillips curve (O.G., not modified/expectations) and draw a graph of the relationship. How good was this model with 1960’s data vs with data from 1970-2000’s? Describe the Lucas critique.
a) Explain the concept of the natural rate of unemployment using the expectations-augmented (modified or modern) Phillips curve model. b) Why is this model useful for policy-makers?
In what period did the Samuelson-Solow U.S. short-run Phillips curve you've just explored most closely match the data? A. 1930s B. 2000s C. 1960s D. 1940s Screenshot attached thanks!