In the Keynesian business cycle theory, business cycles begin with changes in Select one: O a. the public's expectations about Fed policies. O b. inflation expectations. c. business confidence. d. consumer sentiment. Clear my choice
Q: 1.Suppose the Phillips curve is represented by the following equation: Tt-Tt-1 = 12-Ut. The natural…
A: 1. Concept The natural rate of unemployment, also known as natural unemployment, is the lowest level…
Q: Consider the expectations adjusted Phillips’s curve and assume that expected inflation is given by…
A: Phillips curve is a concept which describes an inverse relationship between inflation and…
Q: Explain the different approaches of Neo Keynesian and Friedman on Philips curve in the short run and…
A: A Phillips curve is a curve that shows the trade-off between the rate of unemployment and the rate…
Q: If inflationary expectations increase, the Phillips curve will Select one: O a. shift to the right O…
A: The Phillips curve shows the trade-off between unemployment and inflation, with less unemployment…
Q: 1. Assume that in an economy the phillips curve is: Att = -0,8 (U-Un) + p Last year's inflation was…
A: The Phillips curve is an economic concept developed by A. W. Phillips stating that inflation and…
Q: Julia is a macroeconomist who works as a policy maker for a European government. She believes that…
A: NAIRU stands for Non-Accelerating Inflation Rate of Unemployment, and the idea is that if the…
Q: Suppose the economy currently has an inflation rate of 7%. Moreover, the slope of the economy's…
A: For a classical model of Phillips Curve we assume that the production function in economy is only a…
Q: 16. Assume that economy has the following Phillips curve n = n° – 2(u – 0.05). Further assume that…
A: Phillip's Curve : π = πe- 2 (u - 0.05 ) πe = π(-1)
Q: The business cycle involves the comparison between Unemployment and inflation. O Real GDP and…
A: Business cycle refers to increase and decrease in real GDP. It refers to expansion and contraction.
Q: If in an economy, there are no supply shocks and expected inflation is 5% over the next. year.…
A: Since you have posted multiple questions, as per guidelines we can solve only one question per…
Q: What is the eqution and shape of the modem aggregate supply curve according to imperfect infomation…
A: Since the question you have posted consists of multiple parts, we will answer the first two parts…
Q: The Phillips curve is given by T, – T; = 0.1– 2u, The inflation is a year becomes the expected…
A: Phillips curve:- it is the theory given by William Phillips which says that there is an inverse…
Q: Suppose that the level of unemployment in the economy is determined by the follow equation: U = 5.24…
A: Generally, there has been an negative association between inflation and unemployment. This implies…
Q: I. Suppose that the Phillips curve is given by 1 = n + 0.1 – 2u; a. What is the natural rate of…
A: * ANSWER :-
Q: “The more people at work, the higher their bills” The Phillips Curve shows the correlation between…
A: "Since you have asked multiple parts, we will answer only the first part for you. If you have any…
Q: I. Suppose that the Phillips curve is given by 1 = n + 0.1 – 2u; a. What is the natural rate of…
A: * ANSWER :-
Q: IV) Suppose that an economy has the Phillips curve: n = n° -0.4*(u – 0.04) a. What is the natural…
A: Hello, thank you for the question. Since there are multiple sub-part questions asked here, only the…
Q: Using AD-AS model, explain how a negative demand shock due to COVID 19 will affect the economy in…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: Assuming that the booming economy is currently at an inflation rate such that unemployment is below…
A: The macroeconomic equilbrium in an economy is determined by the aggregate demand and aggregate…
Q: 4. In the real business cycle model, suppose a war or natural disaster destroys some of the:…
A: We’ll answer the first question since the exact one wasn’t specified. Please submit a new question…
Q: In the Phillips curve equation B is a parameter that measures Select one: a. The response of…
A: The Phillips curve is the curve that is used to show the connection between the unemployment rate…
Q: Chec According to the modern view of the Phillips curve, expansionary macroeconomic policy that…
A: Basics:- Phillips Curve:- It tells about negative relationship between inflation rate and…
Q: Suppose that an economy has a phillips curve π=π₋₁ -0.5(u-0.08) a) what is the natural rate of…
A:
Q: Which of the following would cause the long-run Phillips curve (LRPC) to shift to the left? Select…
A: The Phillips curve represents the relationship between the inflation rate and the rate of…
Q: The Short-Run Phillips Curve given by = E (x) – 0.4 (u- 10) + v Suppose that the economy has…
A: Inflation refers to the increase in the price level of all goods and services. Unemployment occurs…
Q: Compare the traditional Keynesian, new Keynesian, and real business cycle models in terms of…
A: Note .. post b part seperately Answer a questions
Q: The more credible the policymakers who pursue an anti-infation policy, the more successfu that…
A: In economics, credibility refers to the trust and believe in decision making to influence market.
Q: 2. What is the egution and shape of the modem aggregate supply curve according to imperfect…
A: We will answer only the third question for you. The Imperfect Information Model states that neither…
Q: 2. Suppose that an economy has the Phillips curve T = T-1 - 0.5(u – 5). a. What is the natural rate…
A: Philips curve shows the relationship between unemployment and inflation in an economy. The curve…
Q: Stagflation is the a) theory that people form expectations on the basis of all available…
A: Stagflation is a term used to describe a scenario in which unemployment and inflation are both high.…
Q: The Keynesian explanation of the business cycle is based on Select one: O a. fluctuations in…
A: solution : The Keynesian's explanation of business cycle is based on unstable inflationary…
Q: Consider a modified aggregate supply function which takes account for the emergence of random…
A: Output Equation in the economy - yt = πt - πte + y⏜ Where πt = Actual inflation rate , πte =…
Q: 1) According to the Phillips Curve, as unemployment falls what happens to inflation? Why?
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: PLEASE ANSWER ALL PARTS OF QUESTIONS 1 AND 2.
A: Hey, Thank you for the question. According to our policy we can only answer up to 3 subparts per…
Q: Suppose that the level of unemployment in the economy is determined by the follow equation: U = 7.55…
A: Introduction Unemployment rate measures how much unemployment exist in the economy. It is the…
Q: h and that episodes of high unemployment are politically difficult for policymakers. Is it possible…
A: A situation in which an increase in private agents' expectations of inflation pressures the central…
Q: Suppose that an economy has the Phillips curve p=p-1 - O.S(u - 0.06), a) What is the natural rate…
A: A. W. Phillips invented the Phillips curve, which states that inflation and unemployment have a…
Q: Explain the concept of the natural rate of unemployment using the expectations-augmented (modified…
A: If an economy is facing heavy unemployment, an expansionary policy could be implemented to remove…
Q: Define “time inconsistency” of economic policy? b) Examine why policy makers might be tempted to…
A: Due to policy inconsistency throughout time, it is a case of rulers over discretion. Policymakers…
Q: Consider a modified aggregate supply function which takes account for the emergence of random…
A: The aggregate supply function of an economy can be represented by the adaptive expectations Phillips…
Q: Suppose the economy currently has an inflation rate of 7%. Moreover, the slope of the economy's…
A: For a classical model of Phillips Curve we assume that the production function in economy is only a…
Q: Consider an economy with a natural unemployment rate, u, of 4%. The expectations-augmented Phillips…
A: Okun’s Law states that an increase in the unemployment rate by 1 percent in the economy will lead to…
Q: Suppose government-spending increases while the economy is at full employment. 1. What effect will…
A: Hi! Thank you for the question. As per the honor code, We’ll answer the first question since the…
Q: 4. The expectation augmented Phillips curve takes the form T = T° – 3(u – ū), with the natural rate…
A: We have given expectation argumented Philips curve. And okun's law.
Q: In Figure 12 the economy's current output is £200 billion and the equilibrium level of output is…
A: The economy is below full employment equilibrium when its current output / GDP is lower than the…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- 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."Suppose 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.1) According to the Phillips Curve, as unemployment falls what happens to inflation? Why? 2) According to the Phillips Curve, as unemployment rises what happents to inflaiton? Why? 3) According to the Aggregate Supply/ Aggrgeate Demand model, if AD increases what happebs to Price Level GDP and Unemployment 4) Accroding to the AS/AD model, if AD decreases what happens to PL, GDP and unemployment? 5) According to the AS/AD model if AS decreases what happens to PL GDP and unemployment? 6) Based on your answer to #5 how would you show the decrease in AS on the Philips Curve?
- c. According to the Keynesian theory, what would be the effect of the “A wave of investor and consumer pessimism about the future profitability of capital investments and lower future income” on output (Y), the real interest rate (r), employment (L) and the price level (P)? Distinguish between the short run and the long run effects by using the IS-LM-FE and AD-AS models and the effective labor demand theory.Suppose that an economy has a phillips curve π=π₋₁ -0.5(u-0.08) a) what is the natural rate of unemployement? b) how much cyclical unemployment is necessary to reduce inflation by 5% points? using okun's Law, compute the sacrifice ratio. c) inflation is runnuing 10%. the fed wants to reduce it to 5%. give two scenarios that will achieve that goal.Suppose πt = πt−1 −2(ut −0.04) is the Phillips Curve equation in the economy. Answer thefollowing questions.a. What is the natural rate of unemployment?b. Graph the short run and the long run relationship between inflation and unemployment.c. How much cyclical unemployment is necessary to reduce inflation by 10 percentagepoint?d. The inflation is running at 12 percent. The Central Bank wants to reduce it to 9 percent.Give two scenarios that will achieve the goal.
- 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 ?Let’s see just how much high expected inflation can hurt incentives to save for the long run. Let’s assume the government takes about one‑third of every extra dollar of nominal interest you earn. You must pay taxes on nominal interest. However, if you are rational, you will care mostly about your real, after‑tax interest rate when deciding how much to save. ?i ??=?Eπ=π 23×?23×i (23×?)−?(23×i)−π Nominal interest rate Inflation (no surprises) Nominal after‑tax return Real after‑tax return 15% 12% 10% -2% 6% 3% 12% 9% 90% 87% 900% 897% Calculate the nominal and real after‑tax return for each case.Nominal interest rate = 6%, inflation = 3% Nominal after‑tax return: % Real after‑tax return: % Nominal interest rate = 12%, inflation = 9% Nominal after‑tax return: % Real after‑tax return: % Nominal interest rate = 90%, inflation = 87% Nominal after‑tax return: %…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)?
- My question is (c). Basically, AS curve becoming steeper can be reflected by the value of v bar increases, showing that inflation is more sensitive to SR AD shock. However, this is no impact on AS shock theoretically, as AS shock relates to the change of o bar. So I guess maybe the provided solution is wrong, could u please check it for me? Thanks a lot!Assuming that the booming economy is currently at an inflation rate such that unemployment is below the natural level. (а) How does the economy return to the natural rate of unemployment if this inflation rate persists? (b) the government wants to bring the output back to the natural level by changing the tax rate, how should it respond?Suppose in the real business cycle model that there is a simultaneous temporary increase inboth current government spending and in the current money supply. Draw diagrams for thelabour, goods and money market, and the production function. Determine the equilibriumeffects of these two shocks occurring simultaneously on employment, output, consumption,investment, money, real wages, the real interest rate, and the price level. Provide a detailedeconomic analysis explaining your results with the aid of the diagrams.