Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN: 9781305971509
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 23, Problem 5PA
To determine
Reasoning out the arguments of inflation using the Phillips curve .
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Consider the nature of unemployment and inflation and predict whether or not they should have some sort of relation with each other. Explain why you expect that relation to hold true.
Suppose the Federal Reserve sets the real interest rate to 1.5%.
Moreover, assume that there are no demand shocks, that b = 2.5, and
that F = 0.02. If the resulting change in the inflation rate is +0.375
percentage points, what is the value of the parameter D? (Round to the
nearest hundredth.)
Hint: Use the IS and Phillips Curves to calculate your answer.
What is the "Phillips Curve"? Why do inflation and unemployment tend to be inversely related?
Chapter 23 Solutions
Principles of Macroeconomics (MindTap Course List)
Ch. 23.1 - Prob. 1QQCh. 23.2 - Prob. 2QQCh. 23.3 - Prob. 3QQCh. 23.4 - Prob. 4QQCh. 23.5 - Prob. 5QQCh. 23.6 - Prob. 6QQCh. 23 - Prob. 1CQQCh. 23 - Prob. 2CQQCh. 23 - Prob. 3CQQCh. 23 - Prob. 4CQQ
Ch. 23 - Prob. 5CQQCh. 23 - Prob. 6CQQCh. 23 - Prob. 1QRCh. 23 - Prob. 2QRCh. 23 - Prob. 3QRCh. 23 - Prob. 4QRCh. 23 - Prob. 5QRCh. 23 - Prob. 6QRCh. 23 - Prob. 7QRCh. 23 - Prob. 8QRCh. 23 - Prob. 9QRCh. 23 - Prob. 10QRCh. 23 - Prob. 1PACh. 23 - Prob. 2PACh. 23 - Prob. 3PACh. 23 - Prob. 4PACh. 23 - Prob. 5PACh. 23 - Prob. 6PACh. 23 - Prob. 7PACh. 23 - Prob. 8PA
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- We have talked about inflation. Consider the following question and evaluate: Do rising oil prices cause inflation?arrow_forwardHow does Philip's curve describe the relationship of inflation and unemployment? What are the criticisms on the Phillip's curve?arrow_forwardYou observe the following short-run Phillips curve for the economy: T = 9.2 -0.26(u - 6.5%) + v. There are no supply shocks to the economy, and the actual unemployment rate is 6.5% (and will stay that way for the foreseeable future). What will expected inflation be next year? Write your answer as a percentage, and round at one (1) decimal. Do not write the percentage sign. If you need more information to answer the question, write "O".arrow_forward
- Do people on fixed incomes benefit or loose out from periods ofrelatively high inflation?arrow_forwardWhy do some economists believe that it may be necessary to live with a certain amount of inflation in order to keep the unemployment rate at a low level?arrow_forwardWhat do you mean by hyper inflation. Explain in brief ?arrow_forward
- If expected inflation decreases, does the short-run Phillips curve shift? If so, what direction does it shift? Does the long-run Phillips curve shift? If so, what direction does it shift?arrow_forwardWhat unique factors in the 1970s era caused widespread inflation?arrow_forwardwhat are the major reasons of hyper inflation?arrow_forward
- 1. Problems and Applications Q1 Consider the following four situations: A. Actual inflation is 6 percent, and expected inflation is 6 percent. B. Actual inflation is 4 percent, and expected inflation is 6 percent. C. Actual inflation is 4 percent, and expected inflation is 4 percent. D. Actual inflation is 6 percent, and expected inflation is 4 percent.arrow_forwardJerome Powell is attempting to lower inflation. His actions look a lot like Paul Volcker’s disinflation policy and model. Graphically illustrate this effect and explain the process. Is it possible to reduce inflation without causing a recession?arrow_forwardWhy are we typically more concerned with unanticipated inflation than we are with fully anticipated inflation?arrow_forward
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