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- Suppose the economy is operating at a point where output is less than the natural level of output. Which of the following statements is correct given this information? Select one: a. Workers will revise upwards price expectations. b. The inflation level will be higher next period than this period. c. The unemployment rate is less than the natural unemployment rate. d. The inflation level is less than the expected inflation level. e. None of the above.Demand-pull inflation arises due to Part 2 A. a higher price level. B. a decrease in the short-run aggregate supply. C. a depreciation of the US$. D. a decrease in the aggregate demand. Part 3 Which of the following would create demand-pull inflation? Part 4 A. An increase in household income. B. A decrease in wages paid to workers. C. Increased international trade barriers. D. An increase in the real rate of interest.Consider the Efficiency Wage story. Suppose we had several periods of 0 inflation. Let ST represent the total supply of labor; SNS the supply of non-shirking (not lazy) workers, and SShrk the number of shirking (lazy) workers. Suppose we had several periods of 0% inflation. Then if we had an increase in Aggregate Demand that caused an increase in the Aggregate Price level, we would see which of the following in the short run? Group of answer choices a) higher inflation and lower unemployment. b) None of the other options. c) lower inflation (which would be deflation given our premise) and higher unemployment. d) higher inflation and higher unemployment. e) lower inflation (which would be deflation given our premise) and lower unemployment.
- Use aggregate demand (AD) and supply (AS) analysis to predict the effects of COVID-19 pandemic on inflation and output. Show and describe the effects in both the short run and the long run. (Demonstrate these effects on a graph) (Hint: First, classify the COVID-19 pandemic as a supply shock or a demand shock or both)The Phillips curve in Lowland takes the form of π = 0.04 – 0.5 (u – 0.05), where π is the actual inflation rate and u is the unemployment rate. The Phillips curve in Highland takes the form of π = 0.08 – 0.5 (u – 0.05). The current unemployment rate in both countries is 9 percent (0.09). Explain the difference in the Phillips curves in Highland and in Lowland.The Phillips curve in Lowland takes the form of π = 0.04 – 0.5 (u – 0.05), where π is the actual inflation rate and u is the unemployment rate. The Phillips curve in Highland takes the form of π = 0.08 – 0.5 (u – 0.05). The current unemployment rate in both countries is 9 percent (0.09). Explain the similarities in the Phillips curves in Highland and in Lowland.
- Suppose that a rise in consumer spending causes an expansion. 1. On the following graph, shift a curve or adjust the point to reflect the short-run effect of the rise in consumer spending. (Please use the image attached) 2. In the short run, inflation rises? falls? and unemployment rises? falls?. Now suppose that over time, expected inflation changes in the same direction that actual inflation changes. 3. After the expansion is over, the economy faces a worse? better? set of inflation–unemployment combinations.Explain: “Unemployment can be caused by a decrease of aggregate demand or a decrease of aggregate supply.” In each case, specify the price-level outcomes.Explain different approaches – Neo Keynesian, Friedman, and Lucas – of Philips curve in the short – run and Phillips curve in the long – run
- Which of the following statements is correct? a. Inflation and unemployment are negatively related in the short run and in the long run. b. In the short run, unemployment and inflation are negatively related. In the long run they are largely unrelated problems. c. In the short run, unemployment and inflation are positively related. In the long run they are largely unrelated problems. d. Inflation and unemployment are positively related in the short run and in the long run.The Phillips curve represents the relationship between unemployment and inflation. You are required to think about the impact on the economy of movements along the curve. If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year? Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.Multiple Choice (1 point each, 27 points in total) Figure 35-6 Use the graph below to answer the followingquestions. Refer to Figure 35-6. Curve 1 is the long-run aggregate supply curve and Curve 2 is the aggregate demand curve. long-runaggregate supply curve and Curve 2 is the short-run aggregate supply curve. long-runPhillips curve and Curve 2 is the short-run Phillips Curve. Long-runPhillips curve and Curve 2 is the aggregate demand curve.
