PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 15, Problem 4P
(a)
To determine
Calculation of short-run equilibrium output and long-run inflation rate.
(b)
To determine
Calculation of inflation rate.
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Students have asked these similar questions
Suppose that the level of unemployment in the economy is determined by the follow equation:
U = 5.24 - 1.87*(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 5.24%, and people have adaptive expectations. What does the
inflation rate need to be this year in order for the unemployment rate to be 3.01%?
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.
The country of Freeland has an aggregate demand curve determined by the equation
M + U = 6%
Freeland also has a potential growth rate of 2%.
Using this information, draw Freeland's aggregate demand (AD) and long-run aggregate supply (LRAS) curves on the graph.
Inflation rate (%)
12
11
10
9
8
7
6
5
4
3
2
1
0
-2
-1 0
LRAS
1 2 3 3 4 5 6
Real GDP growth rate (%)
prevailing inflation rate:
What is the prevailing inflation rate in Freeland?
AD
What is the prevailing real GDP growth rate?
prevailing real GDP growth rate:
7
8
9 10
%
%
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.
Chapter 15 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
Ch. 15.A - Prob. 15A.1CCCh. 15 - Prob. 1RQCh. 15 - Prob. 2RQCh. 15 - Prob. 3RQCh. 15 - Prob. 4RQCh. 15 - Prob. 5RQCh. 15 - Prob. 6RQCh. 15 - Prob. 7RQCh. 15 - Why, in the absence of public beliefs that the...Ch. 15 - Prob. 9RQ
Ch. 15 - Prob. 10RQCh. 15 - Prob. 1PCh. 15 - For the economy in Problem 1, suppose that...Ch. 15 - Prob. 3PCh. 15 - Prob. 4PCh. 15 - For each of the following, use an AD-AS diagram to...Ch. 15 - Prob. 6PCh. 15 - Suppose that a permanent increase in oil prices...Ch. 15 - An economy is initially in recession. Using the...Ch. 15 - Prob. 9PCh. 15 - Prob. 10PCh. 15 - Prob. 11PCh. 15 - Prob. 15.1CCCh. 15 - Prob. 15.2CCCh. 15 - Prob. 15.3CCCh. 15 - Prob. 15.4CCCh. 15 - Prob. 15.5CCCh. 15 - Prob. 15.6CCCh. 15 - Prob. 15.7CCCh. 15 - Prob. 15.8CCCh. 15 - Prob. 15.9CCCh. 15 - Prob. 15.10CC
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