MACROECONOMICS FOR TODAY
10th Edition
ISBN: 9781337613057
Author: Tucker
Publisher: CENGAGE L
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Question
Chapter 17, Problem 18SQ
To determine
The impact of the shift in the AD in the economy.
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Compared to the Adaptive Expectations Theory, the Rational Expectations Theory
A) asserts the same conclusions about policy activism.B) implies that policy activism is less effectiveC) implies that policy activism is more effective.D) asserts that people cannot anticipate the effects of policies in advance.E) the inflation arising from an expansionary policy will be less.
Assume that the housing market is in equilibrium in year 1. In year 2, the mortgage rate that banks
charge consumers decreases, but producers are not affected. Which of the following is most likely to be
the equilibrium change?
Price
D.
Quantity
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The equilibrium will be at point C before the change in expectations and point A after the
a
change
The equilibrium will be at point A before the change in expectations and point B after the
b
change
The equilibrium will be at point A before the change in expectations and point C after the
change
The equilibrium will be at point E before the change in expectations and point C after the
d
change
[3 Fulls
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Assume the economy is described by the following equations:
Phillips Curve:
Okun's Law:
T = Tt-1 – 1.5% – (ut – 0.05)
AY/Y = 3% - 3(ut– 0.05)
a) How could we know that expectations are not rational in this setup?
b) Imagine that last year's inflation is equal to 11%. Imagine the Federal Reserve raises
unemployment to 8% and keeps it there until inflation reduces to 2%. How many years of
8% unemployment would it take for inflation to reach 2%?
c) What values of inflation would we observe over time as inflation reached 2%?
d) How much output is lost to bring down inflation to 2%?
Chapter 17 Solutions
MACROECONOMICS FOR TODAY
Ch. 17.3 - Prob. 1YTECh. 17.6 - Prob. 1YTECh. 17 - Prob. 1SQPCh. 17 - Prob. 2SQPCh. 17 - Prob. 3SQPCh. 17 - Prob. 4SQPCh. 17 - Prob. 5SQPCh. 17 - Prob. 6SQPCh. 17 - Prob. 7SQPCh. 17 - Prob. 8SQP
Ch. 17 - Prob. 9SQPCh. 17 - Prob. 1SQCh. 17 - Prob. 2SQCh. 17 - Prob. 3SQCh. 17 - Prob. 4SQCh. 17 - Prob. 5SQCh. 17 - Prob. 6SQCh. 17 - Prob. 7SQCh. 17 - Prob. 8SQCh. 17 - Prob. 9SQCh. 17 - Prob. 10SQCh. 17 - Prob. 11SQCh. 17 - Prob. 12SQCh. 17 - Prob. 13SQCh. 17 - Prob. 14SQCh. 17 - Prob. 15SQCh. 17 - Prob. 16SQCh. 17 - Prob. 17SQCh. 17 - Prob. 18SQCh. 17 - Prob. 19SQCh. 17 - Prob. 20SQ
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