Consider the short-run Phillips curve. If the actual unemployment rate falls below the full employment rate of unemployment, it should be expected that: the Phillips curve would shift downwards wages would fall the natural rate of unemployment would fall the inflation rate would increase
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- the Phillips curve would shift downwards
- wages would fall
- the natural rate of unemployment would fall
- the inflation rate would increase
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- Assume that the unemployment rate rises. What is the impact on the short run Phillips curve? O It will shift up. O There will be movement along the curve to the left. O There will be movement along the curve to the right. OIt will shift down. Show Transcribed Text The following equations describes an economy: Y=C+I+G+ NX C = 250 +0.7*(1-t)Y t = 0.2 1 = 300 G = 60 NX = 40 Which of the following statements is true? O If exports increase by 10, equilibrium Y will increase by 33. O Without any changes, the equilibrium level of Y is 2167. O If government spending increases by 40, equilibrium Y will increase by 46.51. The value of the government spending multiplier is 2.27. Show Transcribed TextQuestion 16 In the Phillips Curve diagram below, the economy is currently at its non- accelerating inflation rate of unemployment with an inflation rate of L. Inflation (%) ABCD L M 0 S LRPC SRPC2 SRPC1 NAIRU T Unemployment (%) Which one of the following is least likely to reduce the non-accelerating inflation rate of unemployment? Measures to increase the mobility of labour Measures to improve the availability of job information An increase in spending on education and training A rise in aggregate demandFor each of the following scenarios, illustrate the effects of the development on both the short-run and long- run Phillips curves (SRPC and LRPC respectively). Plz show a colored graph so I can see if I moved them to the right positions For each of the following scenarios, illustrate the effects of the development on both the short-run and long-rum Phillips curves (SRPC and LRPC, respectively) There is a fall in the natural rate of unemployment. LRPC Unemployment Rate SRPC There is an advance in technology that makes production more efficient. There is a decrease in taxes. LRPC Unemployment Rate SAPC SRPC LRPC SAPC ° Movement along SRPC LRPC LRPC SRPC
- If the actual unemployment rate falls below the natural unemployment rate, how does the actual inflation rate change? The actual inflation rate ________. A. doesn't change, but the short-run Phillips curve shifts leftward B. rises up along the short-run Phillips curve C. doesn't change, but the expected inflation rate rises D. rises and the natural unemployment rate fallsThe Phillips Curve and Inflation - End of Chapter Problem Recently, policy makers have debated whether an increase in the federal minimum wage, currently at $7.25 an hour, would be good for the economy. Determine how each of the given scenarios affects the Phillips curve. a. Policy makers announce that effective next week, the federal minimum wage will be $15 an hour. This will cause the Phillips curve to shift upward b. Policy makers announce that the federal minimum wage will increase to $15 an hour over the next 10 years by annual the Phillips curve to shift upward increases of $0.78. This will cause c. Explain how the initial increase in the federal minimum wage for low-wage earners could lead to a wage-price spiral throughout the economy. The increase in wages increases disposable income. This in turn leads to greater demand, which in turn results in higher prices.Suppose the Phillips curve is given by the following: 2ut It Where: π = Tt-1 Suppose πt-1 = 0; at year t, authorities decide to keep unemployment rate at 4% forever. a. Compute the rate of inflation for years t+1, t+2 and t+3. b. Suppose half of labor contract of workers has been indexed. What is the new equation for the Phillips curve? Compute the rate of inflation for years t+1, t+2 and t+3. i. π = 0.1 ii. iii. Compared to your answers in problem (a), what can you conclude?
- The long-run Phillips Curve describes: The relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience. O An increase in expected inflation will cause nominal wages to rise, shifting both SRAS and the Phillips Curve up. That there is a predictable negative relationship between the output gap and the unemployment rate but it is not one to one. The negative short-run relationship between the unemployment rate and the inflation rate.The following graph plots the long-run Phillips curve (LRPC) and short-run Phillips curve (SRPC₁) for an economy currently experiencing long-run equilibrium at point A (grey star symbol). INFLATION RATE (Percent) 7 6 1 0 0 SRPC 1 2 3 5 6 UNEMPLOYMENT RATE (Percent) LRPC 4 Which of the following is true along SRPC₁? O The natural rate of unemployment is 3%. O The expected inflation rate is 5%. O The actual unemployment rate is 6%. O The actual inflation rate is 5%. 7 8 + 00 SRPC₂ D CSuppose that = 1° , and the Phillips curve equation for the economy is below: T = 4.5% - 0.2u, If inflation (T,) is 3.5%, then u, is 22.5 %. v tend to decrease If the actual unemployment rate in this economy is equal to 6%, the rate of inflation wi tend to increase be zero remain constant
- Assume that inflation falls significantly below expectations. Diagramboth the short-run and long-run effects on employment using a PhillipsCurve diagram. What changes in this model to allow the return to long-runequilibrium?The Phillips curve is given by T, – T; = 0.1– 2u, The inflation is a year becomes the expected inflation in the next year. The unemployment rate is kept by the fed at 4%. If the inflation in the last year was 0, then the inflation in the next year will be: A. 1% В. 2% С. 3% D. 4% Answer O A O B DThe following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC). PRICE LEVEL INFLATION RATE 0 3 LRAS 4 5 LRPC 9 AD O AD LRAS 6 12 UNEMPLOYMENT RATE (Percent) 15 SRPC 18 Ⓒ SRPC - LRPC
