Suppose the infation rate has been 15 percent for the past four years. The unemployment rate is currently at the natural rate of unemployment of 5 percent. The Bank of Canade decides that t wants to permanently reduce the intation rate to 6 percent. To de this, the Bank of Canada would use policy As a result of this policy, the unemployment rate will be the natural rate of 5 percent and the infation rate will be edging slowly. Use the ine drawing lool to draw the line that illustrates what will happen the Bank of Canada maintains this poliey long enough that workers and firms lower their expectations of future infation. Properly label this line. Carefully follow Phe instructions above, and only draw the required objects. Ir the the Bank of Canada policy is successful, the infation rate wil be epercent. percent and the unemployment rate will be

What sort of event could lead to a simultaneous decrease in the rates of inflation and unemployment? an increase in money supply a decrease in raw material prices a decrease in money supply O an adverse supply shock

With the inflation rate on the vertical axis and output on the horizontal axis, the long run aggregate supply curve O a. Is horizontal because of money illusion O b. Is upward-sloping because a higher inflation rate implies higher profits for the firms O c Is upward-sloping because of money illusion O d. Is vertical because Yp is independent of the inflation rate

If inflation is expected to steadily decrease in the future, the term structure of interest rates will most likely be: a. upward sloping. O b. humped. c. downward sloping. O d. flat. O e. double-humped.

Please no written by hand solution tle shifts the Central Bank rule to the right. O a. An increase in the Z factors O b. A decrease in the price level O c. An increase in government spending O d. A decrease in government spending

(a) Explain the difference between the nominal wage and the real wage. Using a wage setting curve and aprice setting curve illustrate how the real wage determines the equilibrium level of employment in theeconomy. (b) On a new diagram use a wage setting curve and a price setting curve to illustrate the change to theequilibrium level of employment if there is a reduction in the degree of competition faced by firms. Clearlystate what will occur to the real wage and the level of unemployment. (c) Suppose the economy has low aggregate demand with high unemployment. Use a new wage setting curveand price setting curve diagram to explain how the economy could automatically adjust back to equilibrium.Would this occur in reality? Justify your answer.

Using the simple monetary rule Rt-r=m(T-), if m=0.5 and the inflation rate is 2 percent below the target inflation rate, the Federal Reserve will A. raise the marginal product of capital by 1 percent. B. lower the interest rate by 1 percent. O C. raise the interest rate by 1 percent. OD. lower the marginal product of capital by 1 percent. O E. lower the target rate by 2 percent.

Output growth will equal O when which of the following conditions is satisfied? Select one: a. 0% nominal money growth; 2% inflation. O b. 2% nominal money growth; 2% inflation. O c. 3% nominal money growth; 0% inflation. O d. -2% nominal money growth; 1% inflation. O e. None of the above.

Question 3 In Germany, banks are paying a positive interest rate on peoples' savings, as a result O a. Savers are worse off if the inflation rate in Germany is zero O b. Savers are better off if the inflation rate in Germany exceeds the nominal interest rate Oc. Savers are worse off if the deflation rate in Germany is zero O d. Savers are better off if the deflation rate in Germany is zero

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