ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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- Consider the original presentation of the Phillips Curve, with inflation on the vertical axis and unemployment on the horizontal axis. Which of the following could NOT shift this Phillips Curve upward? an increase in the price of inputs used in production expected higher prices in the future/higher inflation an increase in the average wages of workers an improvement in production technologyarrow_forwardIf most people have rational expectations, how long will recessions last? Explain using your beliefs and experiences coupledarrow_forwardDefine the Phillip curve. Is the Phillip curve a great planning tool at the hands of the government? Explain why or why not. What does the Phillips curve look like in the short-run and in the long-run and explain the reasons for their shapesarrow_forward
- Discuss what the long-run Phillips curve looks like in the neoclassical perspective, and why the trade-off between inflation and unemployment disappears. From this perspective, what is the best government policy response to favorable economic conditions in the long run?arrow_forwardPlease mark true or false for the following statements. 1. When there are adaptive expectations, it implies that there is persistence (inertia) in inflation:arrow_forwardIllustrate the effects of the following developments on Phillips curves. Give the economic reasoning underlying your answers. a) In order to increase the amount of highly skilled labour in Indonesia, the government decided to make an online training program. What will happen to the Phillips Curve?arrow_forward
- Imagine there is a Eurozone recession.arrow_forwardObservations of inflation in the 1970s prompted what further addition to the Phillips curve? expected inflation price shocks personal consumption expenditures all of the above none of the abovearrow_forwardOn average, households spend 22.37 cents out of each dollar ofincome shocks. When people receive an additional dollar (an “income shock”), how many additional cents of that dollar do people spend on average.arrow_forward
- The equation of the Phillips curve from 1970 to 1995 is: -17.4-1.2u₁. The natural rate of unemployment using this curve is 6.2%. (round your answer to one decimal place) The equation of the Phillips curve from 1996 to 2018 is: x=2.8% -0.16+ Which of the following explains why the natural rate of unemployment cannot immediately be calculated from the Philips curve? A. The expression only provides Ⓡ and a. B. The equation does not include a specific value for expected inflation. C. The expression only provides (m + z) and . D. None of the above. Using the line drawing tool, accurately graph the Phillips relation=2.8% -0.16 with inflation on the vertical axis and unemployment on the horizontal axis. Carefully follow the instructions above and only draw the required object. What is the natural rate of unemployment using the relation = 2.8% -0.16u, under the assumption that the value of x=2% The natural rate of unemployment fell to 5% between 1970-1995 and 1996-2018? (round your answer to…arrow_forwardThe rational expectations assumption is unrealistic because, essentially, it amounts to the assumption that every consumer has perfect knowledge of the economy.” Discuss in the context of developing countries.arrow_forwardSuppose that the public expects that inflation will be high and that episodes of high unemployment are politically difficult for policymakers. Is it possible for the economy to be at a bad equilibrium as a result of people’s expectations of inflation (i.e. expectations trap)? Explain in terms of a Phillips Curve diagram.arrow_forward
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