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 points.
Assuming that the central bank (together with the government) can
in fact contain the unemployment rate, how many years at least must
the unemployment rate increase beyond its natural level to achieve
the objective of the central bank?
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Suppose that Phillips curve for an economy is given by πt = πe t
+ 0.12−3.ut...
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...
In the Phillips curve equation (πt - πt - 1 = (m + z) - ut...
In the Phillips curve equation (πt - πt - 1 = (m + z) - ut , which of the following will cause a reduction in the current inflation rate? a. a reduction in the markup, m b. a reduction in the expected inflation rate c. an increase in the unemployment rate d. all of the options listed
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...
Assume that unemployment, u, is related to inflation, π, according to the following Phillips curve:
Assume that unemployment, u, is related to inflation, π, according to the following Phillips curve: u = u − φ (π−πe), where u is the natural rate of unemployment and πe is the expected rate of inflation. Assume rational expectations and that the central bank’s preferences are given by the loss function L(u,π) =λu+π2, where λ denotes the weight that the central bank assigns unemployment.a. Suppose that φ = 1. Show what rate of inflation a central bank with λ...
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...
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 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 =...
3. Suppose that the Phillips curve is given by: It = TE + a - but,...
3. Suppose that the Phillips curve is given by: It = TE + a - but, where is the inflation rate, Ti is the expected inflation, ut is the rate of unemployment and, a and b are two positive parameters. Suppose that a fraction 1 € (0,1) of wage contracts are indexed to inflation and Ti = litt + (1 - 1) Tt-1. (a) Derive the new equation for the Phillips curve. [2 marks] (b) Derive an algebraic expression for...
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....
Problem 2. (Optimal policy) Suppose the Phillips curve of an economy is given by Also suppose the...
Problem 2. (Optimal policy) Suppose the Phillips curve of an economy is given by Also suppose the objective of the policymaker is to minimize the loss function L given by In this question we are going to evaluate a variety of policy rules the policymaker can implement. (a) If the policymaker commits to the policy rule and is credible, then the agents' expectation of the inflation is equal to the level of inflation picked by the policymaker. In other words,...
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...
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 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 =...
3. Suppose that the Phillips curve is given by: It = TE + a - but, where is the inflation rate, Ti is the expected inflation, ut is the rate of unemployment and, a and b are two positive parameters. Suppose that a fraction 1 € (0,1) of wage contracts are indexed to inflation and Ti = litt + (1 - 1) Tt-1. (a) Derive the new equation for the Phillips curve. [2 marks] (b) Derive an algebraic expression for...
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....
Problem 2. (Optimal policy) Suppose the Phillips curve of an economy is given by Also suppose the objective of the policymaker is to minimize the loss function L given by In this question we are going to evaluate a variety of policy rules the policymaker can implement. (a) If the policymaker commits to the policy rule and is credible, then the agents' expectation of the inflation is equal to the level of inflation picked by the policymaker. In other words,...
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