5. Study Questions and Problems #5 Initially, the economy is operating at the natural rate of 6% unemployment. The anticipated rate of inflation is 6%, and the actual inflation rate is also 6%. According to adaptive expectations, inflation run. In the long run, the unemployment rate will be 6%. . and the unemployment rate, Suppose that in the next period, there is an increase in aggregate demand that causes an unexpected rise in the inflation rate to 10%. According to adaptive expectations, inflation and the unemployment rate short run. In the long run, the unemployment rate will be 6%. Suppose that in the next period, there is an increase in aggregate demand that causes an unexpected rise in the inflation rate to 12%. According to adaptive expectations, inflation run. In the long run, the unemployment rate will be 6%. . and the unemployment rate 6% in the short 6% in the 6% in the short

5. Study Questions and Problems #5 Initially, the economy is operating at the natural rate of 6% unemployment. The anticipated rate of inflation is 6%, and the actual inflation rate is also 6%. According to adaptive expectations, inflation run. In the long run, the unemployment rate will be 6%. . and the unemployment rate, Suppose that in the next period, there is an increase in aggregate demand that causes an unexpected rise in the inflation rate to 10%. According to adaptive expectations, inflation and the unemployment rate short run. In the long run, the unemployment rate will be 6%. Suppose that in the next period, there is an increase in aggregate demand that causes an unexpected rise in the inflation rate to 12%. According to adaptive expectations, inflation run. In the long run, the unemployment rate will be 6%. . and the unemployment rate 6% in the short 6% in the 6% in the short

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Aggregate Supply

Section: Chapter Questions

Problem 1.1P

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Similar questions

Is the increase in labor force participation rates among women better thought of as causing an increase in cyclical unemployment or an increase in the natural rate of unemployment? Why?
If inflation rises unexpectedly by 5, indicate for each of the following whether the economic actor is helped, hurt, or unaffected: A union member with a COLA wage contract Someone with a large stash of cash in a safe deposit box A bank lending money at a fixed rate of interest A person who is not due to receive a pay raise for another 11 months
In a Keynesian framework, using an AD/AS diagram, which of the following government policy choices offer a possible solution to recession? Which offer a possible solution to Inflation? A tax Increase on consumer income. A surge in military spending. A reduction in (axes for businesses that Increase investment. A major Increase in what the U.S. government spends on healthcare.
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2. Suppose the frictional unemployment rate is 7%, the cyclical unemployment rate is 4% and the structural unemployment rate is 5%, calculate the natural rate of unemployment. 3. Evaluate the effects of anticipated and unanticipated inflation.
9. Study Questions and Problems #9 Initially, the economy is operating at the natural unemployment rate of 5%, and the inflation rate is also 5%. People correctly anticipate that a tax cut will cause the inflation rate to rise to 7%. According to rational expectations, inflation and the unemployment rate 5% in the short run. In the long run, the unemployment rate will be 5%.
8. The economy begins in long-run equilibrium. Then one day, the president appoints a new chairman of the Federal Reserve. This new chairman is well-known for his view that inflation is not a major problem for an economy. a. How would this news affect the price level that people would expect to prevail? b. How would this change in the expected price level affect the nominal wage that workers and firms agree to in their new labor contracts? c. How would this change in the nominal wage affect the profitability of producing goods and services at any given price level? d. How does this change in profitability affect the short-run aggregate-supply curve? e. If aggregate demand is held constant, how does this shift in the aggregate-supply curve affect the price level and the quantity of out-put produced? f. Do you think this Fed chairman was a good appointment?
7 Find and describe an inflation contemporary issue of supply and demand into three paragraphs with empirical facts including proper sources and citations related to macroeconomics as well as interesting.
4. The long-run Phillips curve This graph shows the long-run Phillips curve (LRPC) and several of the short-run Phillips curves (PC) for an economy. INFLATION RATE (Percent) 12 PC PC PC LRPC 15 1 21 3 B + D E +° + +2 G + 5 6 UNEMPLOYMENT RATE (Percent) ? Assume that the economy is initially at point E, with an expected and actual rate of inflation of 6% and an unemployment rate of 5%. Which of the following events could lead the economy to move to point H in the short run? The government increases spending. O Consumption spending rises. Net exports increase. The Fed raises interest rates. Which of the following statements would best explain a move from point H to point G? Nominal wages are renegotiated at the lower inflation rate of 3%, leading to an increase in employment. The government pursues a contractionary monetary policy.