MindTap Economics, 1 term (6 months) Printed Access Card for Gwartney/Stroup/Sobel/Macpherson's Macroeconomics: Private and Public Choice, 16th (MindTap Course List)
16th Edition
ISBN: 9781305648104
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 15, Problem 10CQ
To determine
Explain the inflation situation in the mid-1970s and explain the difference between the modern view and earlier view of the
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Prior to the mid-1970s, many economists thought a higher rate of unemployment would reduce the inflation rate. Why? How does the modern view of the Phillips curve differ from the earlier view?
Do you think the Phillips curve is a useful tool for analyzing the economy today? Why or why not?
The period from the late 1990s to the winter of 2000 was marked by falling unemployment rates and falling inflation rates as well. How does economic theory explain this apparent violation of the Phillips curve model?
Chapter 15 Solutions
MindTap Economics, 1 term (6 months) Printed Access Card for Gwartney/Stroup/Sobel/Macpherson's Macroeconomics: Private and Public Choice, 16th (MindTap Course List)
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- Overstimulating the economy: Suppose the economy today is producing output at its potential level and the inflation rate is equal to its long-run level, with π = 2%. What happens if policymakers try to stimulate the economy to keep output above potential by 3% every year? How does your answer depend on the slope of the Phillips curve?arrow_forwardHow can you show an output gap on the vertical phillips curve model?(can use the full inflation targeting model if that helps)arrow_forwardTrue or false? An increase in inflation expectations shifts the short-run Phillips curve right and has no effect on the long-run Phillips curve.arrow_forward
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