Question

I have a homework assignment for an Intro to Math Economics Class that I'm having difficulty understanding.

(Short Run Phillips Curve Problem) A short-run Phillips curve for our purposes is simply the rate of inflation as a function of the rate of unemployment. Suppose that we have found that over the years that the Phillips curve had a very simple form, namely, that the product of the inflation rate and the unemployment rate was always 20 percent no matter what the individual values.

a. Find the Equation.

b. Graph

c. In the graph, show the product of the rate of inflation the unemployment rectangle in your diagram.

I have a feeling for part c that this involves demonstrating a rectangle hyperbola, I am just extremely confused as to how to set up the equation. This is the last problem for my homework! Thanks! :)

Answer 1

a. Taking y as the rate of inflation and x as the unemployment rate, the condition shows that their product is always 20% or 0.2

xy=0.2

Which is the equation of the short run philips curve

b. Graphing the following equation with rate of inflation on y axis and unemployment rate on x axis we getc. Now Taking two points and drawing the rectangles around them to show the area=xy=0.2

+ xy = 0.2 x=0.2 -10 +.30 „,0 „O y=1 -10 x=0.5 -10 0.6 y=0.4 -10 -0.2 0.4 0.6 0.8

Hope it helps. Do ask for any clarifications required.

xy = 0.2 x=0.2 -10 (0.2, 1) x y=1 3 -10 x x=0.5 -10 3 x y=0.4 -10 3 (0.5, 0.4) -0.2 0.6 0.8 powered by