Question 6 Below you find the supply determined model for the closed economy: Y; = A - crt-1 (IS curve) II = II-1+ a(Y - Y") (Phillips curve) %3D r = r" + (I1+1 – II") (Monetary policy rule) Solve the supply determined model and derive a definite solution for the inflation rate. calcula- tions, :
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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 an economy that starts out in steady state when the central bank decides to make the inflation target more ambitious. Analyse the effects of a decrease in the inflation target from ? to . Explain the mechanisms behind the adjustment to the new steady state.Please see below. These are true or false questions. Need help with all of these please and thank you. T/F Questions. 1. The price level is measured by using a basket of goods and services and calculating how the nominal cost of buying that basket of goods will change over time. 2. The base year values of all price indices is always equal to 1. 3. The rate of inflation is measured as the percentage change between price levels or the values of a price index over time.
- In the basic New Keynesian model, suppose that there is an increase in the future marginal product of capital. Explain your results with the aid of diagrams. Suppose that the central bank keeps the nominal interest rate at its initial value. What will be the effect on current inflation and on output? Suppose that the economy initially faces an increase in anticipated future inflation and a zero output gap. When the shock occurs, what should the central bank do?1. In an OLG model with money: Each gen picks 12 banans when young, 4 bananas when old. Central bank prints out 2 units of money, given to gen 0 for free. A. In equilibrium, 1 money = ______ bananas. B. The level of employment is _____ in each period. (how many people are employed each period) C. The unemployment rate in this economy is ______%. what other information do you need? I dont have any other information, this is all that I was given.Assume that the cconomy of Country X his an actual unemployment rate of 7%, a natural rate of unemployment of 5%, and an inflation rate of 3%. Using the numerical values given above, draw a correctly labeled graph of the short-run and long-run Phillips curves. Label the current short-run equilibrium as point B. Plot the numerical values above onthe graph. Assume that the government of Country X takes no policy action to reduce unemployment. In the long run, will each of the following shill to the right, shift to the left, or remain the same? (i) Short-run aggregate supply curve. Explain. (ii) Long-run Phillips curve Identify a fiscal policy action that could be used to reduce the unemployment rate in the short run. Draw a correctly labeled graph of aggregate demand and short-run aggregate supply, and show the impact on the equilibrium price level and real gross domestic product (GDP) of the fiscal policy action identified
- 32 There is a new central bank president who wants low inflation much more than the previous president did. According to the Augmented Phillips Curve Model, in this situation, which of the following would be the most help in keep unemployment from rising in the sort run? a.People know the central bank president's true desires and believe he will stay in office for a long time b.Peoples' wage wage contracts are long-lasting. c.People know the central bank president's true desires and believe that he will only be in office for a short time. d.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for a short time. e.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for aAggregate demand function is given by Y=7000-20P; the short-run aggregate supply function is given by Y=6000+5(P-Pe). The economy was in equilibrium when the government unexpectedly increased its spending which led to a shift of the aggregate demand curve to Y=7500-20P. What's the rate of inflation? Please illustrate the calculations by means of an AS-AD graph.Using last 5 tenure of unemploymemt and inflation?? Does the philip curve hold ???
- Harare Zimbabwe's central bank today raised its key intrest rate from 50 percent to 70 percent. The governor of the Reserve Bank of Zimbabwe said the higher rate was inteded to slow consumer spedning, increase foreign buying of Zimbabwe dollars, and slow the rate of inflation, currently running at approximately 200 percent a year. According to the World View after the key intrest rate was raised what was, a) the nominal intrest rate? b) the real intrest rate?"5. Consider the Phillips curve πt = πt-1 – 0.5(ut – 0.01). a) What is the natural rate of unemployment? Graph the short-run and long-run relationships between inflation and unemployment? b) How much unemployment is necessary to reduce inflation by 3%? Compute the sacrifice ratio. Show your work. c) Do flexible exchange rates permit a country to pick its own unemployment-inflation trade-off target?Explain inflation dynamics for the Turkish economy using modern Phillips curve equation. - Use data and get graph for each component in the equation.
