II. True or False short explanations are needed if False) 1. Suppose a long-lasting bad business cycle shock hits the economy. Some workers' skills are destroyed and they are permanently out of the labor unions. If the historical u" is 5% and the current u is 8%, then cyclical unemployment rate equals to 3%. 2. A positive Phillips curve shock (supply shock) always increases inflation and decreasing output. 3. Lucas critique says that using macroeconomic model and estimated parameters to forecast the effect of policy changes may not valid. 4. According to the IS-LM model, increasing government purchase can shift the IS curve to the right because it increases the investment.

II. True or False short explanations are needed if False) 1. Suppose a long-lasting bad business cycle shock hits the economy. Some workers' skills are destroyed and they are permanently out of the labor unions. If the historical u" is 5% and the current u is 8%, then cyclical unemployment rate equals to 3%. 2. A positive Phillips curve shock (supply shock) always increases inflation and decreasing output. 3. Lucas critique says that using macroeconomic model and estimated parameters to forecast the effect of policy changes may not valid. 4. According to the IS-LM model, increasing government purchase can shift the IS curve to the right because it increases the investment.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Which of the following is correct if there is a favorable supply shock? a. the short-run aggregate supply curve and the short-run Phillips curve both shift right. b. the short-run aggregate supply curve and the short-run Phillips curve both shift left. c. the short-run aggregate supply curve shifts left and the short-run Phillips curve shifts right. d. the short-run aggregate supply curve shifts right and the short-run Phillips curve shifts left.
Answer all of these questions to get amazing feedback if you are not don't waste your time because you will get horrible feedback!! 1. Inflation always increases from one month to the next? True or false 2. A person may become unemployed as a result of cutbacks in a business’s production? True or False 3. Which type of unemployment is experienced by a person who is simply out of work, is actively seeking a job, and could start working immediately? A. Structural unemployment B. Cyclical unemployment C. Frictional unemployment D. Seasonal unemployment 4. To calculate full unemployment, which citizens are taken into consideration? A. All citizens legally able to work B. All citizens who are able to work C. All citizens D. All citizens willing and able to work
Problem 5. Suppose people's inflation expectations are subject to ran- dom shocks: at time t-1, expected inflation in time t is Et-1t = Tt-1+t-1 where nt-1 is a random shock with mean zero but deviates from zero when some event beyond past inflation causes expected inflation to change. Also, Ett+1 = πt +Nt. 3 A. Derive the DAD and DAS equations. Hint: For DAS, express T as a function of (Y - Y); for DAD, express Y, as a function of (T- πt). B. Suppose the economy experiences an inflation scare: in period t, people believe that inflation in t+1 will be higher so nt> 0 (but for this period only). What happens to DAD and DAS in t? Explain what happens to output, inflation, nominal interest rate, and real interest rate. Show a graph and provide labels for equilibrium points (A, B, C, etc.) as needed.
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Question 3 Explain why the Phillips Curve is drawn to show a positive relationship between aggregate output and inflation, and why a move up the curve to an above- equilibrium output level may be followed by an upward shift of the whole curve. I
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5. Consider the standard Phillips curve. Select all the correct statements: (a) A positive aggregate demand shock will lead to an upward shift in the Phillips curve. (b) Changes in short-run output will lead to movements along the Phillips curve. (c) A negative inflation shock will lead to movements along the Phillips curve. (d) A shock to the price of oil will lead to a shift in the Phillips curve. (e) The inflation rate will always be equal to zero when short-run output is equal to zero.
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IS-MP & Phillips Curvel a. Draw an economy in long-run equilibrium when the real interest rate is 3.5% using the IS-MP model as a function of the output gap. On the graph below, show the Phillips Curve as a function of the unemployment rate if the natural rate off unemployment is 4.6%. Label the initial equilibrium point A. b. Now show the effect of an increase in investment in the IS-MP and the Phillips Curve. Label this new equilibrium point B. IS-MP Phillips Curve (as a function of Unemployment)
QUESTION 9 The short-run Phillips curve shifts upward when: actual unemployment decreases actual unemployment increases. actual inflation increases. expected inflation increases. ●●
Question 2 In line with the following theories on the business cycle, explain the primary cause of economic fluctuations each theory stresses. a. Keynesian b. New Classical c. New Keynesian d. Real Business Cycle