In Figure 12 the economy's current output is £200 billion and the equilibrium level of output is shown by the position of the Vertical Phillips Curve (VPC). Which of the following policies could be adopted to achieve a zero output gap? (Choose one or more answers.) Select one or more: O A. An increase in income tax. O B. A quantitative easing initiative. O C. An increase in interest rates. O D. A cut in Value Added Tax.

In Figure 12 the economy's current output is £200 billion and the equilibrium level of output is shown by the position of the Vertical Phillips Curve (VPC). Which of the following policies could be adopted to achieve a zero output gap? (Choose one or more answers.) Select one or more: O A. An increase in income tax. O B. A quantitative easing initiative. O C. An increase in interest rates. O D. A cut in Value Added Tax.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Measuring The Cost Of Living

Section: Chapter Questions

Problem 9PA

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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.
1.(1)Social loss is L=(u-5)^2+(pi-2)^2Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public.If gov't is honest, then gov't best choice of pi is: pi=___(2)Social loss is L=(u-5)^2+(pi-2)^2Philips curve is u=6-(pi-pi_e), where pi is actual inflation rate, pi_e is expected inflation by the public. If gov't is honest, then the smallest social loss possible is L=_____
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) Suppose that 20,000 of the employed switches to jobs in the undergroundeconomy. When interviewed by STATIN, 50% of these switchers report that theyare not working and not seeking work, while the other 50% report that they arenot working but seeking work. Explain what happens to the officialunemployment rate and the “true” unemployment rate. (d) Illustrate and carefully explain the impact of an increase in the income tax ratefrom 25 percent to 35 percent on the demand for labour, supply of labour,equilibrium wage and level of employment.
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