EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 9781305465626
Author: Blinder
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Chapter 34, Problem 2DQ
To determine
The truth of the given statement.
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Explain in details how high inflation can lead to a recession in several ways.
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Chapter 34 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
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- The country of Freeland has an aggregate demand curve determined by the equation M+v=6% Freeland also has a potential growth rate of 2%. Using this information, draw Freeland's aggregate demand (AD) and long-run aggregate supply (LRAS) curves on the graph. Inflation rate (%) 12 11 10 9 8 7 6 5 3 2 4 LRAS ADarrow_forwardA stable inflation rate is necessary to forecast business activities and make better investment decisions. * True or false?arrow_forwardExplain whether policy makers should be more concerned about the economy going into a recession or facing high inflation and why.arrow_forward
- could policy makers achieve a permanently lower level of unemployment if they were prepared to accept a slightly higher average rate of inflationarrow_forwardWhen do policy makers justify their fiscal and monetary policy impact to be highly positive and effective on employment growth and income/output growth? Explain under what situation and what process the policy makers feel these to happen. (Hint: The role of labor market among others are responsible in explaining this). Explain.arrow_forwardSuppose that government decides to support the firms for their investments in research and the development.Assuming this support increases roductivity in the economy, use aggregate demand and supply analysis to predict the short-run and long-run effects on inflation and output. Show these effects on a graph and explain the results in detail.arrow_forward
- what is the mean by the "time inconsistency"of economic policy? why might policymakers be tempted to renege on an annoucement they made earlier ? in this situation, what is the advantage of a policy rule? explain how it might arise in the case of the short run trade off between inflation and unemployement?arrow_forwardDuring July 2020, Japan’s u was 2.6%; economists have estimated that Japan’s un is 2.5%. If Japan has an accelerationist PC, what would have happened to Japan’s inflation rate during July? Illustrate fully by showing where Japan was functioning using the appropriate graph. Make all your assumptions clear.arrow_forwardThis is commonly described as "too much money chasing too few goods." More accurately, it should be described as involving "too much money spent chasing too few goods," since only money that is spent on goods and services can cause inflation. It is the opposite of cost-push inflation. Explain how increase in government spending and increase wages for labor will lead to inflation in Ghana [HINT SUPPORT YOUR EXPLANATIONS WITH APPROPRIATE DIAGRAMS] ?arrow_forward
- In every election year, politicians sing their own praises of having stabilized prices through the attainment of single digit inflation. As a macroeconomist, explain three policy measures that could be used to fight inflationsarrow_forwardDuring July 2020, Japan’s u was 2.6%; economists have estimated that Japan’s un is 2.5%. If Japan has an accelerationist PC, what would have happened to Japan’s inflation rate during July? Explain fully by showing where Japan was functioning using the appropriate graph. Make all your assumptions clear; calculations not required.arrow_forwardFor a country, economists have estimated that structural unemployment is 2.0% and frictional unemployment is 3.0%. If total unemployment is currently 4.0%, this suggests that: a) The economy is in a recessionary gap, with actual output greater than potential output. b) The economy is in an inflationary gap, with actual output greater than potential output. c) There is no output gap, and actual output is equal to potential output. d) The economy is in a recessionary gap, with actual output less than potential output. e) The economy is in an inflationary gap, with actual output less than potential output.arrow_forward
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