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Suppose that the economy can be described by the following three equa- tions: Uz - Ut-1...
4)- Suppose for a given economy, the Phillips Curve is given by itthen 0.25 ut +...
4)- Suppose for a given economy, the Phillips Curve is given by itthen 0.25 ut + 1.25%, and the Okun's law: ut - Ut-1=-0.5gyt + 4%. Also assume that Teen Tt-1, and the growth rate of money supply has been 18% for a long time. (Total 19 points) a)- What are the inflation rate, unemployment rate, and growth rate of output at the medium run equilibrium. (4.5) b)- Calculate the natural rate of unemployment and NAIRU. (2) c)- Starting from...
2. Phillips Curve. An economy has the following functions for its short run aggregate supply (SRAS),...
2. Phillips Curve. An economy has the following functions for its short run aggregate supply (SRAS), Okun's Law (OL), and Phillips Curve (PC): SRAS: P = EP + (1/2)(y - 3) OL: (Y-Y) = -4(u-u") PC:T = ET - (1/5)( - 6) The economy begins at its natural rate of output with a stable price level equal to $5. a.) Output is at its natural level when the price level is equal to expectations. Calculate the natural rate of output...
You are given that the economy has a natural rate of unemployment of 3.3%. Let inflation...
You are given that the economy has a natural rate of unemployment of 3.3%. Let inflation change by -0.3 percentage points. Assuming a slope of 1/3, use the Phillips Curve and Okun's Law to fine the corresponding unemployment rate. Note: find short run output first, then the unemployment rate. Do not type the "%" sign, and round to two decimal places. Example: .0815 = 8.15% should be entered as 8.15
Problem 3.(36 points) Suppose the natural rate of unemployment equals 5%, and the Phillips curve is given by πt = πte −...
Problem 3.(36 points) Suppose the natural rate of unemployment equals 5%, and the Phillips curve is given by πt = πte − 0.25(ut − u∗t ). Suppose originally the economy is in the long run equilibrium, in which πte = 4%. 1. Determine unemployment and inflation rates corresponding to the original equilibrium. 2. Draw the Philips curve diagram with SRPC and LRPC. Mark the original long run equilibrium. 3. Suppose now the central bank performs a monetary expansion and raises...
Suppose the Fed doubles the growth rate of the quantity of money in the economy
Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. The size of the labor force The inflation rate The price level The level of technological knowledge Suppose the economy produces real GDP of $30 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply (LRAS) curve on the graph. Suppose the...
Suppose the Fed doubles the growth rate of the quantity of money in the economy. In...
Suppose the Fed doubles the growth rate of the quantity of money in the economy. In the long run, the increase in money growth will change which of the following? Check all that apply. The price level The inflation rate The quantity of physical capital The size of the labor force Suppose the economy produces real GDP of $70 billion when unemployment is at its natural rate. Use the purple points (diamond symbol) to plot the economy's long-run aggregate supply...
Consider an economy with a natural unemployment rate, u, of 4%. The expectations-augmented Philli...
Consider an economy with a natural unemployment rate, u, of 4%. The expectations-augmented Phillips curve is Assume that Okun's Law holds so that a 1 percentage point increase in the unemployment rate maintained for one year reduces GDP by 2% of full employment output. Note: Okun's Law can be expressed as: 2( u-u) a. Consider a two-year disinflation. In the first year actual inflation, π' is 14% and expected inflation, π.s 18%. What is the first year unemployment rate? %...
Suppose that workers and firms perfectly forecast inflation, so that the real wage remains unchanged as...
Suppose that workers and firms perfectly forecast inflation, so that the real wage remains unchanged as the price level rises over time. Prices and wages rise at the same rate, which implies that the real wage stays constant. The following graph shows the aggregate demand curve (AD) in an economy in long-run equilibrium. Assume the natural rate of unemployment is 6%, and potential output is $50 trillion. Use the orange points (square symbol) to draw the aggregate supply curve in...
ECON 1150
In the year 2023, aggregate demand and aggregate supply in the fictional country of Gurder are represented by the curves AD2023AD2023 and AS on the following graph.Suppose the natural rate of output in this economy is $6 trillion.On the following graph, use the green line (triangle symbol) to plot the long-run aggregate-supply (LRAS) curve for this economy.LRASOutcome C0246810121416108107106105104103102101100PRICE LEVELOUTPUT (Trillions of dollars)ADAADBAD2023ABASEconomists have forecast that if the government does nothing and the economy continues to grow at the current rate, aggregate demand...
8) Consider an economy in long-run equilibrium with an inflation rate () of 0.08 per year and a natural unemployment rate of 0.05. Suppose Okun's law holds and a one percentage point unemplo...
8) Consider an economy in long-run equilibrium with an inflation rate () of 0.08 per year and a natural unemployment rate of 0.05. Suppose Okun's law holds and a one percentage point unemployment rate reduces real output by 2% of full-employment output. The expectation-augmented Phillips curve is givep by increase in the т . ne . 2.5 (u-005). Consider a two distr maErTTelintyear,π .006 and me . 008. In the second year, π.004 and㎡. (a) In the first year, what...
4)- Suppose for a given economy, the Phillips Curve is given by itthen 0.25 ut + 1.25%, and the Okun's law: ut - Ut-1=-0.5gyt + 4%. Also assume that Teen Tt-1, and the growth rate of money supply has been 18% for a long time. (Total 19 points) a)- What are the inflation rate, unemployment rate, and growth rate of output at the medium run equilibrium. (4.5) b)- Calculate the natural rate of unemployment and NAIRU. (2) c)- Starting from...
2. Phillips Curve. An economy has the following functions for its short run aggregate supply (SRAS), Okun's Law (OL), and Phillips Curve (PC): SRAS: P = EP + (1/2)(y - 3) OL: (Y-Y) = -4(u-u") PC:T = ET - (1/5)( - 6) The economy begins at its natural rate of output with a stable price level equal to $5. a.) Output is at its natural level when the price level is equal to expectations. Calculate the natural rate of output...
Consider an economy with a natural unemployment rate, u, of 4%. The expectations-augmented Phillips curve is Assume that Okun's Law holds so that a 1 percentage point increase in the unemployment rate maintained for one year reduces GDP by 2% of full employment output. Note: Okun's Law can be expressed as: 2( u-u) a. Consider a two-year disinflation. In the first year actual inflation, π' is 14% and expected inflation, π.s 18%. What is the first year unemployment rate? %...
Suppose that workers and firms perfectly forecast inflation, so that the real wage remains unchanged as the price level rises over time. Prices and wages rise at the same rate, which implies that the real wage stays constant. The following graph shows the aggregate demand curve (AD) in an economy in long-run equilibrium. Assume the natural rate of unemployment is 6%, and potential output is $50 trillion. Use the orange points (square symbol) to draw the aggregate supply curve in...
8) Consider an economy in long-run equilibrium with an inflation rate () of 0.08 per year and a natural unemployment rate of 0.05. Suppose Okun's law holds and a one percentage point unemployment rate reduces real output by 2% of full-employment output. The expectation-augmented Phillips curve is givep by increase in the т . ne . 2.5 (u-005). Consider a two distr maErTTelintyear,π .006 and me . 008. In the second year, π.004 and㎡. (a) In the first year, what...
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