5. Consider the relationship between inflation, output, and unemployment. a. Think about the economy in the...
5. Consider the relationship between inflation, output, and unemployment.
a. Think about the economy in the long run.
i. In the long run, what determines unemployment?
ii. In the long run, what determines output (GDP)?
iii. In the long run, what determines inflation?
iv. In the long run, is there a tradeoff between inflation and unemployment? Explain why or why not
Homework Answers
i) In the long run inflation has no effect on unemployment as per the phillips curve. Unemployment is determined by the long run output level.
ii) In the long run out put is determined by natural rate of unemployment rhis relation is okun's law.
iii) In the long run inflation is determined by economic growth rate and money growth rate as depicted by ad-as
iv) No there is no tradeoff between unemployment and inflation because unemployment in the long run tends to converge to its natural rate.
Add Answer to:
5. Consider the relationship between inflation, output, and
unemployment.
a. Think about the economy in the...
Consider the relationship between inflation, output, and unemployment. Think about the economy in the long run....
Consider the relationship between inflation, output, and unemployment. Think about the economy in the long run. In the long run, what determines unemployment? (2 points) In the long run, what determines output (GDP)? (2 points) In the long run, what determines inflation? (2 points) In the long run, is there a tradeoff between inflation and unemployment? Explain why or why not (3 points).
1) When will a tradeoff occur between inflation and unemployment? (hint: think about the Philips curve)...
1) When will a tradeoff occur between inflation and unemployment? (hint: think about the Philips curve) a) short run b) long run c) neither d) a and b 2) Is the rate of ____ is zero in the long run a) inflation b) unemployment c) employment d) none of the above
1. Inflation and the Australian Economy The Australian Bureau of Statistics recently reported that there was no change in consumer prices between the start of January and end of March, equating t...
1. Inflation and the Australian Economy The Australian Bureau of Statistics recently reported that there was no change in consumer prices between the start of January and end of March, equating to a quarterly inflation rate of 0%. The Reserve Bank of Australia has highlighted their concerns that inflation has been consistently lower than their target range of inflation a) Why would the RBA consider inflation that is too low to be problematic for the Australian economy? b) What measure...
1. Inflation and the Australian Economy The Australian Bureau of Stat tistics recently reported that there was no change in consumer , equating to a quarterly inflation rate of 0%. The Reserve Ba...
1. Inflation and the Australian Economy The Australian Bureau of Stat tistics recently reported that there was no change in consumer , equating to a quarterly inflation rate of 0%. The Reserve Bank of Australia has highlighted their concerns that inflation has been prices between the start of Jan uary and end o rch consistently lower than their target range of inflation. a) Why would the RBA consider inflation that is too low to be problematic for the Australian economy?...
1. The long-run model determines determines a. potential output; long-run inflation, current output, current inflation b....
1. The long-run model determines determines a. potential output; long-run inflation, current output, current inflation b. potential output; unemployment, current output; long-run inflation c. current output; long-run inflation; unemployment, current inflation d. potential output; unemployment; unemployment, current inflation e. current output: unemployment; potential output; current inflation andwhile the short-run model and , and 2. The IS curve describes short-run movements in an economy via which of the following? ↑Interest rate ↑ Investment → ↓ Output ↑Interest rate → ↓Investment →...
Explain the tradeoff between inflation and unemployment in the short-run and the long-run.
Explain the tradeoff between inflation and unemployment in the short-run and the long-run.
1. While over the long run, the economy grows about 2 to 3% per year on average, over the shorter term, the economy goes through business cycles. Think about the growth rate of GDP, the inflation rate, and the unemployment rate over the last 12 quarters.
While over the long run, the economy grows about 2 to 3% per year on average, over the shorter term, the economy goes through business cycles. Think about the growth rate of GDP, the inflation rate, and the unemployment rate over the last 12 quarters. Once you’ve looked at the data, can you draw conclusions about the state of the economy? Would you describe the economy as booming, recovering, or in recession during the last few years? Why? Use the AD-AS model...
1. Is the Phillips curve a myth? Intertemporal tradeoff between inflation and unemployment After the World...
1. Is the Phillips curve a myth? Intertemporal tradeoff between inflation and unemployment After the World War II, empirical economists noticed that, in many advanced economies, as unemployment fell, inflation tended to rise, and vice versa. The inverse relationship between unemployment and Inflation, was depicted as the Phillips curve, after William Phillips of the London School of Economics. In the 1950s and 1960s, the Phillips curve convinced many policy makers that they could use the relationship to pick acceptable levels...
Suppose the economy is operating below potential output. Inflation is 2% and expected inflation is 3%....
Suppose the economy is operating below potential output. Inflation is 2% and expected inflation is 3%. The unemployment rate is 8% and the natural unemployment rate is 4%. 54. iv. Draw a long-run Phillips curve and a short-run Phillips curve consistent with these conditions w. The government implements expansionary monetary policy. As a result, unemployment decreases to 6% and inflation increases to 2.5%. Expectations however. do not change. Show where the economy is on the graph you drew for (a)...
eopunents are and how they affect pe ear ve relationship between inflation and the unemployment rate. ch 14, notes) New classical economists argued that anticipated monetary and fiscal policy d n...
eopunents are and how they affect pe ear ve relationship between inflation and the unemployment rate. ch 14, notes) New classical economists argued that anticipated monetary and fiscal policy d no effect on output (policy ineffectiveness postulate) and potentially caused a misallocation of resources in the long run. Explain why they believe these two ideas. ch 1
eopunents are and how they affect pe ear ve relationship between inflation and the unemployment rate. ch 14, notes) New classical economists argued...
1. Inflation and the Australian Economy The Australian Bureau of Statistics recently reported that there was no change in consumer prices between the start of January and end of March, equating to a quarterly inflation rate of 0%. The Reserve Bank of Australia has highlighted their concerns that inflation has been consistently lower than their target range of inflation a) Why would the RBA consider inflation that is too low to be problematic for the Australian economy? b) What measure...
1. Inflation and the Australian Economy The Australian Bureau of Stat tistics recently reported that there was no change in consumer , equating to a quarterly inflation rate of 0%. The Reserve Bank of Australia has highlighted their concerns that inflation has been prices between the start of Jan uary and end o rch consistently lower than their target range of inflation. a) Why would the RBA consider inflation that is too low to be problematic for the Australian economy?...
1. The long-run model determines determines a. potential output; long-run inflation, current output, current inflation b. potential output; unemployment, current output; long-run inflation c. current output; long-run inflation; unemployment, current inflation d. potential output; unemployment; unemployment, current inflation e. current output: unemployment; potential output; current inflation andwhile the short-run model and , and 2. The IS curve describes short-run movements in an economy via which of the following? ↑Interest rate ↑ Investment → ↓ Output ↑Interest rate → ↓Investment →...
1. Is the Phillips curve a myth? Intertemporal tradeoff between inflation and unemployment After the World War II, empirical economists noticed that, in many advanced economies, as unemployment fell, inflation tended to rise, and vice versa. The inverse relationship between unemployment and Inflation, was depicted as the Phillips curve, after William Phillips of the London School of Economics. In the 1950s and 1960s, the Phillips curve convinced many policy makers that they could use the relationship to pick acceptable levels...
Suppose the economy is operating below potential output. Inflation is 2% and expected inflation is 3%. The unemployment rate is 8% and the natural unemployment rate is 4%. 54. iv. Draw a long-run Phillips curve and a short-run Phillips curve consistent with these conditions w. The government implements expansionary monetary policy. As a result, unemployment decreases to 6% and inflation increases to 2.5%. Expectations however. do not change. Show where the economy is on the graph you drew for (a)...
eopunents are and how they affect pe ear ve relationship between inflation and the unemployment rate. ch 14, notes) New classical economists argued that anticipated monetary and fiscal policy d no effect on output (policy ineffectiveness postulate) and potentially caused a misallocation of resources in the long run. Explain why they believe these two ideas. ch 1
eopunents are and how they affect pe ear ve relationship between inflation and the unemployment rate. ch 14, notes) New classical economists argued...
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