ENGR.ECONOMIC ANALYSIS
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ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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13. Suppose the
- the rate of inflation will tend to increase
- the rate of inflation will be constant
- the rate of inflation will tend to decrease
- none of the above
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- 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 long-run Phillips Curve describes: The relationship between unemployment and inflation after expectations of inflation have had time to adjust to experience. O An increase in expected inflation will cause nominal wages to rise, shifting both SRAS and the Phillips Curve up. That there is a predictable negative relationship between the output gap and the unemployment rate but it is not one to one. The negative short-run relationship between the unemployment rate and the inflation rate.arrow_forward28 In applying the Phillips Curve, if Congress enacts expansionary policies to reduce unemployment, the cost is Multiple Choice O O an increase in the inflation rate. a decrease in the inflation rate. an increase in productivity. a decrease in productivity.arrow_forward
- Suppose that = 1° , and the Phillips curve equation for the economy is below: T = 4.5% - 0.2u, If inflation (T,) is 3.5%, then u, is 22.5 %. v tend to decrease If the actual unemployment rate in this economy is equal to 6%, the rate of inflation wi tend to increase be zero remain constantarrow_forward3. A nation consists of 2 political parties, Democrats and Republicans. The Democrats care more about unemployment than Republicans, and Repuhlicans care more about inflation than Democrats. When Democrats hold power, they choose an inflation rate, tp and when the Republicans hold power, they choose an inflation rate, TR. Phillips's curve is: T; = n - 1.5 (u - Un). We assume that: Tp > TR.Natural unemployment rate: Un = 5%. An election is about to be held. Assume that expectations about inflation for the coming year are formed before the election. (Essentially, this assumption means that wages for the coming year are set before the election.) Moreover, it is assumed that the Democrats and Republicans have equal chance of winning the election. 1) Solve for expected inflation, in terms of tpand TR. 2) Suppose the Democrats win the election and implement their target inflation rate, Tp. If T, = 3.2% and TR = 1.5%. Solve for the unemployment rate ult. 3) Suppose the Republicans win the…arrow_forward32 There is a new central bank president who wants low inflation much more than the previous president did. According to the Augmented Phillips Curve Model, in this situation, which of the following would be the most help in keep unemployment from rising in the sort run? a.People know the central bank president's true desires and believe he will stay in office for a long time b.Peoples' wage wage contracts are long-lasting. c.People know the central bank president's true desires and believe that he will only be in office for a short time. d.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for a short time. e.People think that the central bank president's desires are the same as the previous president's and believe that the new president will be in office for aarrow_forward
- Use the table below to calculate core and headline inflation in each time frame relative to the base year, assuming that each category is weighted equally in the calculation of headline inflation. Instructions: Round your answers to one decimal place. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. Year 2014 2018 2014-2018 Food and energy 120 105 Other goods and services 102 107 Core inflation (relative to the base year the base) Headline inflation (relative toarrow_forwardSuppose the Phillips curve is given by the following: πt = π² + (µ+z) aut πι = π + 0.1 Where: π = πt-1 Suppose initially, 0 = 0 a. What is the natural rate of unemployment? 2ut b. Suppose ut = Un. In year t, government authorities decide to bring the unemployment rate down to 3% and hold it there forever. Determine the rate of inflation in years t, t+1, t+2. c. Suppose in year t+5,0 increases from 0 to 1 and ut = 3%. Determine the rate of inflation in year 5 and year 6.arrow_forward(a) What events of the 1970s and 1980s made economists believe that the shortrun relationship between inflation and unemployment was unstable (not fixed and permanent)? (b) Explain, using a diagram(s) and the concept of stagflation, the relationship between shifts in the SRAS curve and the position of the short-run Phillips curve.arrow_forward
- Figure 17-5 Inflation rate (percent per year) 10% 5 0 Long-run Phillips curve 5.5% 7.5 Short-run Phillips curve Unemployment rate (percent)arrow_forwardCan you answer this for me?arrow_forwardSuppose that the Phillips curve is given by +0.1-2 U₂ and expected inflation is given by -(1-0) * +04-1 where 0 is equal to zero and x 0.02 and does not change. The economy is initially at the natural rate of unemployment, which is 5%, when the authorities decide to bring the unemployment rate down to 3% and hold it there forever. With 0 equal to zero, this will yield a 6% rate of inflation every year. Now suppose that in year (t+6), 0 changes to 1. 0 might increase in this way because OA government policy would mandate inflationary expectations. B. inflation expectations adapt to persistently positive inflation OC. inflation expectations change constantly. OD. inflation expectations always adapt immediately to the last period's inflation. In year (+6), the inflation rate will be % (Enter your response as an integer.) In year (+7), the inflation rate will be % (Enter your response as an integer.) In year (+8), the inflation rate will be%. (Enter your response as an integer)arrow_forward
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