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3. Suppose that the Phillips curve is given by: It = TE + a - but,...
Suppose that the Phillips curve is given by - = 0.1 - 2u where = -1 Suppose that inflation in year t - 1 is ze...
Suppose that the Phillips curve is given by - = 0.1 - 2u where = -1 Suppose that inflation in year t - 1 is zero. In year t, the central bank decides to keep the unemployment rate at 45 forever a. Compute the rate of inflation for years t, t + 1, t + 2, and t + 3. Now suppose that half the workers have indexed labor contracts so that = + (1 - A)-1 and 1 =...
4. The Phillips curve is given by TI+ = TE + (m + 2) - aut....
4. The Phillips curve is given by TI+ = TE + (m + 2) - aut. Rewrite this equation as a relation between the deviation of the unemployment rate from the natural rate, inflation, and expected inflation. How does the natural rate of unemployment vary with the mark-up m? How does the natural rate of un- employment vary with the catchall term z? Identify two important sources of vari- ation in the natural rate of unemployment across countries and across...
(18 marks) Suppose that the Phillips curve is given by: TT. = + 0.2 – 5ugs...
(18 marks) Suppose that the Phillips curve is given by: TT. = + 0.2 – 5ugs with people’s expectation of inflation governed by: T = 11-14 At time t = 0, it is known that the economy is in a medium run equilibrium with inflation rate of 3%. a. Find the natural rate of unemployment for this economy. (3 marks) b. If starting t = 1, the government decided to keep unemployment rate permanently at 3%. Find the expected inflation...
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...
3. Discuss the relationship between the natural rate of unemployment, Un, and the Phillips curve, 1lt...
3. Discuss the relationship between the natural rate of unemployment, Un, and the Phillips curve, 1lt – itt-1 = -a(ut – Un); and explain why the natural rate of unemployment is also known as the non-accelerating inflation rate of unemployment (NAIRU). Hints: The central assumption used to derive the Phillips curve, Tet – 1lt-1 = -a(Ut – Un), was that tę = Tt-1, where tę represents expected inflation. What does this mean? Assume that Ut = Un. What happens to...
i only need question 5, thanks 4. Suppose that the Phillips curve is given by TT,...
i
only need question 5, thanks
4. Suppose that the Phillips curve is given by TT, = 1 + 0.1 - 2u a. What is the natural rate of unemployment? Assume that expected inflation is given by m = (1 - 0) +010-1 And suppose that is initially equal to zero and it is given and does not change. It could be zero or any positive value. Suppose that the rate of unemployment is initially equal to the natural rate....
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...
1. Inflation and unemployment. Suppose that the Phillips curve is given by: TI= +0.1 - 2ut...
1. Inflation and unemployment. Suppose that the Phillips curve is given by: TI= +0.1 - 2ut where = 077-1. Also, suppose that is initially equal to zero. (a) What is the natural rate of unemployment? Suppose that the rate of unemployment is initially equal to the natural rate. In year t, the authorities decide to bring the unemployment rate down to 3% and hold it there forever. (b) Determine the rate of inflation in years t, t+1, t +2, +...
Suppose that Phillips curve for an economy is given by πt = πe t + 0.12−3.ut...
Suppose that Phillips curve for an economy is given by πt = πe t + 0.12−3.ut and in the year 2010 the unemployment rate in this economy is at its natural level but inflation is 20%. The unemployment rate is at its natural level and the inflation expectations are formed according to πe t = πt−1. The central bank wants to reduce the inflation rate to 2%, but it does not want unemployment to increase by more than two percentage...
a. Given the original Phillips curve, why is there a negative relation between inflation and the...
a. Given the original Phillips curve, why is there a negative relation between inflation and the unemployment rate? State the two reasons why the original Phillips curve vanished. b. Define the natural rate of unemployment and list down its determinants. What happens to inflation when unemployment is greater than the natural rate of unemployment? When unemployment is lower than the natural rate of unemployment?
Suppose that the Phillips curve is given by - = 0.1 - 2u where = -1 Suppose that inflation in year t - 1 is zero. In year t, the central bank decides to keep the unemployment rate at 45 forever a. Compute the rate of inflation for years t, t + 1, t + 2, and t + 3. Now suppose that half the workers have indexed labor contracts so that = + (1 - A)-1 and 1 =...
4. The Phillips curve is given by TI+ = TE + (m + 2) - aut. Rewrite this equation as a relation between the deviation of the unemployment rate from the natural rate, inflation, and expected inflation. How does the natural rate of unemployment vary with the mark-up m? How does the natural rate of un- employment vary with the catchall term z? Identify two important sources of vari- ation in the natural rate of unemployment across countries and across...
(18 marks) Suppose that the Phillips curve is given by: TT. = + 0.2 – 5ugs with people’s expectation of inflation governed by: T = 11-14 At time t = 0, it is known that the economy is in a medium run equilibrium with inflation rate of 3%. a. Find the natural rate of unemployment for this economy. (3 marks) b. If starting t = 1, the government decided to keep unemployment rate permanently at 3%. Find the expected inflation...
3. Discuss the relationship between the natural rate of unemployment, Un, and the Phillips curve, 1lt – itt-1 = -a(ut – Un); and explain why the natural rate of unemployment is also known as the non-accelerating inflation rate of unemployment (NAIRU). Hints: The central assumption used to derive the Phillips curve, Tet – 1lt-1 = -a(Ut – Un), was that tę = Tt-1, where tę represents expected inflation. What does this mean? Assume that Ut = Un. What happens to...
i
only need question 5, thanks
4. Suppose that the Phillips curve is given by TT, = 1 + 0.1 - 2u a. What is the natural rate of unemployment? Assume that expected inflation is given by m = (1 - 0) +010-1 And suppose that is initially equal to zero and it is given and does not change. It could be zero or any positive value. Suppose that the rate of unemployment is initially equal to the natural rate....
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...
1. Inflation and unemployment. Suppose that the Phillips curve is given by: TI= +0.1 - 2ut where = 077-1. Also, suppose that is initially equal to zero. (a) What is the natural rate of unemployment? Suppose that the rate of unemployment is initially equal to the natural rate. In year t, the authorities decide to bring the unemployment rate down to 3% and hold it there forever. (b) Determine the rate of inflation in years t, t+1, t +2, +...
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