There is a one-period supply shock where o = 0.10. Assume inflationary expectations are adaptive so that = Tt-1· Find inflation in time period 2. Please note this is after the supply shock indicated above has passed so that õ is now back to 0. Enter the value as a percent rounded off to the first decimal place.
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- 1 Inflation in the period t in the economy is described by the following function Tt -0.3 + 0.06u, + T where T; - inflation in the period t, ut - unemployment in the period t. Inflation expectations are formed adaptively: T = 0.7Tt-1 + 0.37_1, where T is the expected inflation in the period t. Let's assume that initially, in the time period t is equal to TO reduction of the inflation rate to the level of 0.05, starting from the year t: unemployment rate in year t = 0 and in year t = 1. 0, the inflation rate coincides with the level of inflationary expectations and T = 0.1. The Central Bank is conducting a policy of permanent (once and for all) 1. Calculate theIf inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant. Select one: True FalseAssume that the price level in an economy is stable with expected inflation initially equal to 3% in period 0. Further assume the economy is then hit by an expansion at the beginning of period 1, and employment remains at a constant high level until the beginning of period 4. With ‘time period’ on the xaxis and ‘inflation rate’ on the y-axis: (i) Plot the path of the bargaining gap (assume it is equal to 1%), inflation and expected inflation from period 1 to the end of period 4. (ii) Provide some reasons for why the bargaining gap might disappear after period 4, and state any other assumptions you are making. (iii) Explain how an increase in the central bank’s policy interest rate would affect the exchange rate through the market for financial assets (such as government bonds). What impact would this have on aggregate demand?
- Consider an economy producing at Yo = 0 and ū = 1/4. The inflation rate at t = 0 is TO = 3%. Now, suppose the economy is hit by an inflation shock ō1 = ō2 = 3%. The shock is temporary and ōt = 0 for t > 2. For the duration of the inflation shock, the economy is in a recession with Y = Ý2 = -1%, which ends with Y3 = 0. Based on this information, you know that the inflation rate T3 is percent. 8.5 8.5 (with margin: 0)Consider an economy producing at Ý, = 0 and ū = 1/4. The inflation rate at t = 0 is To = 3% . Now, suppose the economy is hit by an inflation shock õ1 = ö2 = 3%. The shock is temporary and ōg = 0 for t > 2. For the duration of the inflation shock, the economy is in a recession with Ý1 = Ý2 = -1%, which ends with Ý 3 = 0. Based on this information, you know that the inflation rate 73 i , percent.The table below reports the actual inflation rate from 2016 to 2020. Complete the table, assuming people form expectations adaptively. Give all answers to two decimals, Actual inflation rate Expected inflation rate Error Year 2016 3% 3% 0% 5.50% a) % b) % 2017 6.00% 5.50% c) 2018 4.00% d) 2.00% 2019 2020 2.00% e) Look back at the table. Assuming people form expectations adaptively, which of the following statements are correct? Choose one or more: OA Monetary policy can reduce unemployment only if the policy is expected. OB. When inflation is increasing from year to year, people tend to overestimate inflation. OC. When inflation is decreasing from year to year, people tend to overestimate inflation. O D. When inflation is decreasing from year to year, people tend to underestimate inflation. OE When inflation is increasing from year to year, people tend to underestimate inflation.
- The text proposes the following model of expected inflation x = (1 - 0) x + 0,-1 What do we know about your process of the formation of expected inflation when 0 = 07 OA. Neither last year's inflation rate nor the long-run average inflation rate impact your view on this year's expected rate. OB. Last year's inflation rate will influence you to revise your estimates for this year's expected rate. OC. Regardless of what inflation was last year, you would expect it to be at the long-run average inflation rate this year. OD. Last year's inflation rate and the long-run average inflation rate have an equal impact on your view of this year's expected rate. What do we know about your process of the formation of expected inflation when 0-17 OA. Neither last year's inflation rate nor the long-run average inflation rate impact your view on this year's expected rate OB. Last year's inflation rate will be the only input for you to revise your estimates for this year's expected rate regardless of…Downvote will be given so pls Economics: What is the term used to describe inflation that is influenced by changes in 1 expectations about future price levels? a) Adaptive expectations inflation b) Rational expectations inflation c) Sticky price inflation d) Built-in inflation Which of the following is a characteristic of hyperinflation? a) Inflation rate below 10% per year b) Inflation rate above 50% per monthHow do inflationary expectations influence interest rates on mortgage? Please elaborate by expressing your thoughts about your findings in at least
- In a decelerating inflation environment (e.g. with inflation rate at 20%, 18%, 14%, .. year after year), using "adaptive inflation expectations" formation, the forecasted future inflation rate is likely to be O systematically biased upward. O systematically biased downward. O always correct. O about correct on average.You observe the following short-run Phillips curve for the economy: T = 9.2 -0.26(u - 6.5%) + v. There are no supply shocks to the economy, and the actual unemployment rate is 6.5% (and will stay that way for the foreseeable future). What will expected inflation be next year? Write your answer as a percentage, and round at one (1) decimal. Do not write the percentage sign. If you need more information to answer the question, write "O".Suppose that people consume only three goods, as shown in this table: 2020 Price Quantity 2021 Price Quantity Tennis Balls Percentage Change $2 100 True $2 100 False Golf Balls Bottles of Gatorade $4 100 $6 100 Complete the following table by computing the percentage change in price for each of the three goods. $2 200 $3 200 Tennis Balls Golf Balls Bottles of Gatorade 0% 50% Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is 50 True or False: If you were to learn that a bottle of Gatorade increased in size from 2020 to 2021, that information would raise your estimation of the inflation rate. %