Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Chapter 27, Problem 2SQ
To determine
The illustration of increase in inflation and decrease in
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The modern view of the Phillips curve suggests that
a.when inflation is less than anticipated, unemployment will fall below the natural rate.
b.when inflation is steady, actual unemployment will equal the natural rate of unemployment.
c.systematic demand stimulus policies will be unable to affect prices in the long run.
d.there will be a trade-off between inflation and unemployment in the long run.
“The more people at work, the higher their bills” The Phillips Curve shows the correlation between unemployment and inflation.” In the light of this statement,(a) Draw the short-run trade-off between inflation and unemployment. How might the Central Bank move the economy from one point on this curve to another? (b) Draw the long-run trade-off between inflation and unemployment. Explain how the short-run and long-run trade-offs are related.
(c) Illustrate the effects of the following developments on both the short-run and long-run Phillips curves. Give the economic reasoning underlying your answers.1. A rise in the natural rate of unemployment.2. A decline in the price of imported oil.
Consider the Phillips curves depicted in the graph above. The Fed announces its intention to decrease inflation from 10 percent to 5 percent per year, and it succeeds. If expectations of inflation are not altered by the Fed's announcement, the rate of unemployment will be ________ in the short run.
a)less than 5.5 percent
b)5.5 percent
c)between 5.5 and 7.5 percent
d)7.5 percent
Chapter 27 Solutions
Economics For Today
Ch. 27.3 - Prob. 1YTECh. 27.6 - Prob. 1YTECh. 27 - Prob. 1SQPCh. 27 - Prob. 2SQPCh. 27 - Prob. 3SQPCh. 27 - Prob. 4SQPCh. 27 - Prob. 5SQPCh. 27 - Prob. 6SQPCh. 27 - Prob. 7SQPCh. 27 - Prob. 8SQP
Ch. 27 - Prob. 9SQPCh. 27 - Prob. 1SQCh. 27 - Prob. 2SQCh. 27 - Prob. 3SQCh. 27 - Prob. 4SQCh. 27 - Prob. 5SQCh. 27 - Prob. 6SQCh. 27 - Prob. 7SQCh. 27 - Prob. 8SQCh. 27 - Prob. 9SQCh. 27 - Prob. 10SQCh. 27 - Prob. 11SQCh. 27 - Prob. 12SQCh. 27 - Prob. 13SQCh. 27 - Prob. 14SQCh. 27 - Prob. 15SQCh. 27 - Prob. 16SQCh. 27 - Prob. 17SQCh. 27 - Prob. 18SQCh. 27 - Prob. 19SQCh. 27 - Prob. 20SQ
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- according to phillips curve use the data of unemployment rate and inflation rate , calculate the follwing and interpret the result. years inflation rate % unemployment rate % 2015 2.53 3.75 2016 3.77 3.79 a) change in inflation b) change in unemployment c) Output lost d) Sacrifice ratioarrow_forwardSOLVE IT CORRECTLY AND DETAILS Q)Explain the relationship between inflation and unemployment, as well as concerns when enacting mismatched policies in a Phillips curve.arrow_forwardThe Phillips curve shows the relationship between inflation and what? A) Unemployment. B) The rate of price increases. C) The balance of trade. D) The rate of growth in an economy.arrow_forward
- 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.arrow_forwardTo pursue economic growth in the middle of the pandemic, the government decided to increase the government’s spending. Illustrate the effects of this policy by drawing the short run Phillips curves! What would happen in the long run?arrow_forwardTrue, false or obscure. Justify your conclusion. a) It is desirable to have inflation as close to zero as possible b) High inflation means low unemployment c) The turnover rate of money decreases when nominal interest rates are high d) The probability of the unemployed finding a job is greater if more people change jobs during a given period e) Sticky wages make the Phillips curve steeparrow_forward
- Suppose there is a 1% inflation shock, the Phillips curve beta is 2, the output gap is 1% and inflation expectations are 2%. What should be inflation in the long run? can you please show the formulas and steps for thisarrow_forwardThe Phillips curve is the relationship between (a) Change in GDP from potential and inflation. (b) GDP and unemployment. (c) The percent change in GDP and inflation. (d) The percent change in GDP and unemployment.arrow_forwardWhich of the following is vertical? a. neither the long-run Phillips curve nor the long-run aggregate supply curve b. both the long-run Phillips curve and the long-run aggregate supply curve c. the long-run Phillips curve, but not the long-run aggregate supply curve d. the long-run Phillips curve, but not the long-run aggregate supply curvearrow_forward
- What occurs when the natural unemployment rate increases? A. The short-run Phillips curve doesn't change and the long-run Phillips curve shifts rightward. B. The long-run Phillips curve doesn't change and the short-run Phillips curve shifts upward. C. The long-run and short-run Phillips curves shift rightward and the expected inflation rate rises. D. The long-run and short-run Phillips curves shift rightward and the expected inflation rate doesn't change. tha nksarrow_forwardThe axes below are for showing the Phillips curve model. The Phillips curve shows the trade off between (Select one: unemployment and economic growth/inflation and interest rates/ unemployment and inflation/ real GDP and the price level/ exports and imports/ wages and productivity) The long run Phillips curve would most likely go through points (Select one: ADF/ BEG/ DG/ ABC/ CE) Suppose that both axes are numbered 0 to 10. In June 2006 the NZ economy was most likely at about point (Select one: A/B/C/D/E/F/G). Following the global financial crisis, by June 2010 the NZ economy was most likely at approximately point (Select one: A/B/C/D/E/F/G) The key idea behind the long run Phillips curve is that (Select one below) 1. there is a long term trade off between the two variables on the axes but no short run trade off 2. in the short run lower values of the x-axis variable can be achieved at the expense of higher values of the y-axis variable 3. there is no long run trade off at all…arrow_forwardWhat is Phillips curve? Draw the short-run Phillips curve and the long-run Phillips curve. Explain why they are different.arrow_forward
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