Explain why the Phillips Curve is drawn to show a positive relationship between aggregate output and inflation, and why a move up the curve to an above- equilibrium output level may be followed by an upward shift of the whole curve.

Explain why the Phillips Curve is drawn to show a positive relationship between aggregate output and inflation, and why a move up the curve to an above- equilibrium output level may be followed by an upward shift of the whole curve.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter17: The Philips Curve And Expetactions Theory

Section: Chapter Questions

Problem 2SQ

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1. As the short-run Phillips curve shifts from D to C to B to A, policymakers face: A. higher than expected inflation rates and lower unemployment rates. B. a lower rate of inflation for any level of unemployment. C. the same tradeoff between inflation and unemployment. D. a higher rate of inflation for any level of unemployment.
Answer the following questions briefly.a How is the Phillips curve related to aggregate supply?b. What are the differences between demand-pull inflation and cost-push inflation?c. On what market imperfection does each aggregate supply theory rely? What dothe theories have in common?
“The more people at work, the higher their bills” The Phillips Curve shows the correlation between unemployment and inflation.” In the light of this statement,(a) Draw the short-run trade-off between inflation and unemployment. How might the Central Bank move the economy from one point on this curve to another? (b) Draw the long-run trade-off between inflation and unemployment. Explain how the short-run and long-run trade-offs are related. (c) Illustrate the effects of the following developments on both the short-run and long-run Phillips curves. Give the economic reasoning underlying your answers.1. A rise in the natural rate of unemployment.2. A decline in the price of imported oil.
SOLVE IT CORRECTLY AND DETAILS Q)Explain the relationship between inflation and unemployment, as well as concerns when enacting mismatched policies in a Phillips curve.
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
(i) Discuss the Lucas Critique. (ii) With the help of a diagram, show the implications of Rational Expectations for the Phillips curve.
Consider an economy for which wage and price inflation are initially 3% under a zero output gap. Calculate price inflation by the end of the current period under a new output gap of 6%. (Hint: you need to use the Phillips curve equation)
The 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?
D Question 1 The short-run Phillips curve is a curve that shows the relationship, other things being constant, between and O the inflation rate; the unemployment rate O the inflation rate; the nominal interest rate O the unemployment rate; real GDP 0.1 pts O potential GDP; the natural unemployment rate O the inflation rate; the expected inflation rate .
Only typed answer Consider the Phillips curve shown here. In region B: a. inflation equals expected inflation. b. inflation rises above expected inflation. c. there is insufficient demand. d. the output gap is negative.
Which of the following is vertical? a. neither the long-run Phillips curve nor the long-run aggregate supply curve b. both the long-run Phillips curve and the long-run aggregate supply curve c. the long-run Phillips curve, but not the long-run aggregate supply curve d. the long-run Phillips curve, but not the long-run aggregate supply curve
1. Based on each of the following events, illustrate and explain the effect on the short-run Phillips curve and long-run Phillips curve a) Another World War has break out and impacted many economies. b) Many consumers became pessimistic over the economic outlook due to news reporting of new variants of COVID-19.