MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Chapter 19, Problem 5DQ
To determine
Macroeconomic instability.
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54) If a higher inflation is expected, what would you expect to happen to the shape of the yield curve? Why?
55) What is the shape of the yield curve when short rates are expected to fall in the medium term, and then increase? Demonstrate this graphically.
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- 15. Suppose that the relationship between inflation rate (π) and unemployment rate (u) is described by the following equation: πt – πte = (m + z) – αut where m = 0.05, z = 0.04, and α = 2. In this economy, the authorities keep unemployment rate at 4% forever. a. If the modified Philips curve describes the relationship between π and u correctly, how should “πte” be specified? Rewrite the equation using this specification. Assume that πt–1 = 1%. Compute πt, πt+1, and πt+2. b. Do you believe the answer in part (a)? Why or why not? c. Derive the natural rate of unemployment.arrow_forward4. Does the I in C+I+ G Nx include purchases of stocks and bonds? Why or why not? Lo2 t nnmnonent of I inarrow_forwardHow has the Federal Reserve used monetary policy and how has the Federal Government used fiscal policy to lessen the impact of the COVID-19 recession? A) The Federal Reserve has expanded the money stock while the Federal Government has decreased its spending. B) The Federal Reserve has contracted the money stock while the Federal Government has decreased its spending. C) The Federal Reserve has contracted the money stock while the Federal Government has increased its spending. D) The Federal Reserve has expanded the money stock while the Federal Government has increased its spending.arrow_forward
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