ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question
In the decade through 2020, inflation was consistently low. If people adjusted their inflation expectations to their actual inflation experience, this would
- shift the short-run
Phillips curve down. - shift the short-run Phillips curve up.
- shift the long-run Phillips curve to the left.
- Shift the long-run Phillips curve to the right.
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- Assume that the federal government increases unemployment compensation, which of the following is the correct adjustment on the Phillips Curve Graph?arrow_forwardWhen you graph the Phillips curve, what goes on the y-axis? Change in inflation Rate of inflation Change in consumer price Change in short-run outputarrow_forwardIf the current inflation rate is 10% and you are asked to predict the cost of decreasing it to 3% next year. 1)Will it result deflation policy or a disinflation policy? Why? 2) Give an estimate of the cost in terms of output assuming the sacrifice ratio is 4 and explain the economic cost of reducing inflation by drawing the Phillips curve. 3) If an economist says computing the cost of this policy using the sacrifice ratio is not totally correct because people are rational and they will take the new policy into account when forming expectations about the future. Explain this statement and the reason behind it by showing what happens the Phillips curve 4)if people update their expectations about the future instantaneously. How costly would it be to reduce inflation if the adjustment in expectations occurs instantaneously?arrow_forward
- According to the Rational Expectation Theory, A) people reformulate their expectations of inflation once a change in the inflation rate has occurred. B) people never reformulate their expectations of inflation. C) expectations of inflation are based only on past values of the inflation rate. D) people reformulate their expectations of inflation once a change in policy has occurred. E) none of the above.arrow_forwardWhat occurs when the natural unemployment rate increases? A. The short-run Phillips curve doesn't change and the long-run Phillips curve shifts rightward. B. The long-run Phillips curve doesn't change and the short-run Phillips curve shifts upward. C. The long-run and short-run Phillips curves shift rightward and the expected inflation rate rises. D. The long-run and short-run Phillips curves shift rightward and the expected inflation rate doesn't change. tha nksarrow_forwardSuppose there is a 1% inflation shock, the Phillips curve beta is 2, the output gap is 1% and inflation expectations are 2%. What should be inflation in the long run? can you please show the formulas and steps for thisarrow_forward
- Phillips Curve Question: The Phillips Curve illustrates the relationship between: A) Inflation and government spending B) Inflation and unemployment C) Interest rates and inflation D) Economic growth and inflationarrow_forwardPart a.: The Phillips curve slopes (downward/upward), since a more positive output gap is associated with a (higher/lower) level of unexpected inflation. The labor market Phillips Curve slopes (downward/upward), since a more positive output gap is associated with a (higher/lower) level of unemployment. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardBased on your understanding of the Phillips curve, explain what happens to actual inflation (relative to expected inflation) when the actual unemployment rate is either above or below the natural rate of unemployment.arrow_forward
- Draw a Phillips curve graph here that shows a natural rate of unemployment of 4% and a current inflation rate of 2%. Make sure your lines and axes are labeled and your graph is complete! Use your knowledge of The Phillips Curve to answer the following questions. The threat of future inflation: makes people reluctant to loan money for long periods. makes people eager to loan money for long periods. has no effect on loaning money. increases the value of money paid back in the future. makes people reluctant to borrow money for long periods. According to the short-run Phillips Curve, there is a trade-off between: interest rates and inflation. the growth of the money supply and interest rates. unemployment and economic growth. inflation and unemployment. economic growth and interest rates. Which of the following is true of the long-run Phillips curve? it shows there is a trade-off between unemployment and inflation. it is positively sloped when the inflation rate exceeds…arrow_forwardConsider the short-run Phillips curve. If the actual unemployment rate falls below the full employment rate of unemployment, it should be expected that: the Phillips curve would shift downwards wages would fall the natural rate of unemployment would fall the inflation rate would increasearrow_forwardPrior to the mid-1970s, many economists thought a higher rate of unemployment would reduce the inflation rate. Why? How does the modern view of the Phillips curve differ from the earlier view?arrow_forward
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