Assume that α = β = 1, derive the MR curve graphically using the tangencies between the loss circles and the Phillips curves. With reference to the diagrams, explain the effect of the following (in each case, assume all other parameters are held constant):(a) An increase in the slope of the Phillips curve, α.
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Assume that α = β = 1, derive the MR curve graphically using the tangencies between the loss circles and the Phillips curves. With reference to the diagrams, explain the effect of the following (in each case, assume all other parameters are held constant):
(a) An increase in the slope of the Phillips curve, α.
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- The price of crude oil during the period 2000-2010 can be approximated by P(t) = 6t + 18 dollars per barrel (0 ≤ t ≤ 10) in year t, where t = 0 represents 2000. Saudi Arabia's crude oil production over the same period can be approximated by Q(t) = −0.036t2 + 0.62t + 8 million barrels per day (0 ≤ t ≤ 10). † Use these models to estimate Saudi Arabia's daily oil revenue and also its rate of change in 2008. (Round your answers to the nearest $1 million.) daily oil revenue $ million rate of change in 2008 $ million/yrFollowing data is given for two country Keynesian model with no government (G=T=0) C= 100+0.9Y C* =200+0.8Y* I= 200 |* =400 M=0.1Y M*=0.2Y* NOTE: use a 2-digit accuracy in your calculations, i.e. 1.467238=1.47 or 1.43488=1.43 a. The equilibrium income for the domestic economy is; Y= b. The equilibrium income for the foreign economy is: Y*= c. Assume that the domestic exports increases by 150 units. As a result of this the change in the domestic income is; AY= d. Due to the change in part c, the change in foreign income is; AY*= e. The initial value of the current account balance in domestic economy is; CAB= f. The change in the domestic current account balance due to the change in part c is; ACAB =Question 10 (5 points) Q10. In the wake of the Covid-19 pandemic, many economists argued that inflation was being driven by disruptions to complex and geographically dispersed (global) supply chains. Assuming that is true, or partly true, which of the following would be the best way to alter the Philipps' Curve equation above [n = - a (Uª – U*)] to reflect the impact of supply chains. Which makes the most sense, where is the rate of inflation, Ua is the actual 回 unemployment rate, U* is the full employment rate of unemployment (or the maximum unemployment rate before the economy experiences accelerating inflation), and is a variable measuring the efficiency gained from well-functioning supply chains. =-a (Ua - U •)- €, =-a (Ua-U)+E M-a (Ua - UXE T=-E/-a (Ua-U)] Inflation is caused by excessive cannabis consumption, which is giving many people in our society the delusion of feeling good while eroding the productivity (don't choose this one).
- Consider the following model of the factors that influence a person's annual wage: Y = β0 + β1X1 + β2X2 + β3X1X2 + β4X3 + u where Y = annual wage, in dollars X1= years of formal education X2 = age, in years X3 = variable equal to 1 if male, 0 otherwise U = error term Which of the following is the interpretation of β1 alone? The effect of X1 on Y when X2 = 0 The effect of X1 on Y when X2 is at its median value. The effect of X1 on Y, holding all else equal. The effect of X1 on Y when X2 is at its mean value.Section B Answer the question. Provide the detailed derivation for each answer. Consider the IS-LM model, and suppose that the economy of Mermaid Land can be characterised by the following relations (all units are in millions of domestic currency): C = 200+ 0.25(Y-T) I = 150+ 0.25Y - 1000i d G = 250 T = 200 = 2Y 8000i S = 1600 (a) Derive the equation for the IS curve (b) Derive the equation for the LM curve (c) Solve for equilibrium output (d) Determine the equilibrium interest rate (e) Determine equilibrium levels of consumption and investment (f) Check whether C + G + I=Y (g) Following up on question (e), suppose further that the central bank tries to increase the equilibrium real output by increasing the money supply, such that SI = 1840 Solve for the equilibrium real output and interest rate. (h) Do you think the central bank intervention is effective in increasing the equilibrium real output? Explain your answer briefly.a. According to Fisher Equation “a rise in inflation also rises the nominal interest rate by the same amount”. Construct a regression model by determining dependent and independent variables according to this theory. b.Obtain residuals of the regression. Calculate variance of the residuals and the standard errors of the parameters (note: use the table above for calculations, just write down the final results here). c. Test significance of the slope parameter (the parameter of the independent variable) at 5% significance level. Is it in line with the proposition? d. Evaluate the overall significance of the model with R2 and F test.
- For this question, assume that the Phillips curve equation is represented by the following equation: πt - πt-1 = (m + z) - αut. A reduction in the unemployment rate will cause A) a reduction in the markup over labor costs (i.e., a reduction in m). B) an increase in the markup over labor costs. C) an increase in the inflation rate over time. D) a decrease in the inflation rate over time. E) none of the aboveAggregate demand, aggregate supply, and the Phillips curve In the year 2027, aggregate demand and aggregate supply in the imaginary country of Daisen-Oki are represented by the curves AD 2027 and AS on the following graph. The price level is currently 102. The graph also shows two potential outcomes for 2028. The first possible aggregate demand curve is given by the curve labeled AD(a) curve, resulting in the outcome given by point A. The second possible aggregate demand curve is given by the curve labeled AD(b), resulting in the outcome given by point B. Suppose the unemployment rate is 7% under one of these two outcomes and 6% under the other. Based on the previous graph, you would expect (OUTCOME A or OUTCOME B) to be associated with the higher unemployment rate (7%). If aggregate demand is high in 2028, and the economy is at outcome B, the inflation rate between 2027 and 2028 is (1.96% or 5.00% or 4.00% or 2.94%). Based on your answers to the previous…Derive the original Phillips curve and answer the following questions:a) What effect does an increase in the expected price level have on the price level?b) What effect does an increase in the unemployment rate have on the price level?c) What effect does a decrease in business competition have on inflation?d) What is the effect of liberalizing foreign trade?e) What effect does the formation of trade unions have?
- Suppose the macroeconomic parameters are as follows in Turkey. Production: Y = A K1/3 L2/3 (A= 7 ) Factor supplies: K, L (K = 3000, and L= 1300) Government: 2200, Taxes: 2000 Consumer behavior C = 1000 + 0.6 (Y-T Investment behavior | = 3000 - 1000г Compute real interest rate in Turkey (Show the percentage value as numerical such as 15 for %15 or 0.15).Assume the economy is described by the following equations: Phillips Curve: Okun's Law: T = Tt-1 – 1.5% – (ut – 0.05) AY/Y = 3% - 3(ut– 0.05) a) How could we know that expectations are not rational in this setup? b) Imagine that last year's inflation is equal to 11%. Imagine the Federal Reserve raises unemployment to 8% and keeps it there until inflation reduces to 2%. How many years of 8% unemployment would it take for inflation to reach 2%? c) What values of inflation would we observe over time as inflation reached 2%? d) How much output is lost to bring down inflation to 2%?Suppose that the level of unemployment in the economy is determined by the follow equation: U = 7.55 1.88*(i - ie) Where U is the unemployment rate, i is the actual inflation rate, and it is the expected inflation rate. All variables are entered in percentage form (e.g. if inflation is 30.57%, you plug in 30.57 for i, not 0.3057). Last year, the inflation rate was 7.87%, and people have adaptive expectations. What does the inflation rate need to be this year in order for the unemployment rate to be 2.81%? Note: Everything is already in percentage form. You do not need to multiply or divide by 100 at any point. Enter in your answer as it is calculated in the equation. Round your final answer to two decimal places.