Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 29, Problem 8SPA
To determine
Identify the prediction of Federal open market committee (FOMC) participants.
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Inflation at lowest rate in 5 years
Inflation rate (percent per year)
In September, inflation in the United Kingdom fell to 1.1% a year, its lowest in 5
years. Analysts expected an inflation rate of 1.3% a year.
1.7-
Source: The New York Times, October 13, 2009
With the unemployment rate at 8 percent and the natural unemployment rate at 6
percent, sketch the short-run Phillips curve and mark on your graph the point which
shows the situation in September. Label the point A.
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1.3-
The unemployment rate is 8 percent and the natural unemployment rate is 6
percent.
1.1-
Draw a point that shows the unemployment rate and the inflation rate in
September. Label it A.
Draw a point that shows the natural unemployment rate and the expected inflation
0.9
rate. Label it B.
10
12
Unemployment rate (percent of labor force)
Draw the short-run Phillips curve that is consistent with these data. Label it.
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Inflation at lowest rate in 5 years
Inflation rate (percent per year)
In September, inflation in the United Kingdom fell to 1.1% a year, its
lowest in 5 years. Analysts expected an inflation rate of 1.3% a year.
1.7-
Source: The New York Times, October 13, 2009
With the unemployment rate at 8 percent and the natural unemployment
rate at 6 percent, sketch the short-run Phillips curve and mark on your
graph the point which shows the situation in September. Label the point
A.
1.5-
1.3-
The unemployment rate is 8 percent and the natural unemployment rate
is 6 percent.
1.1-
Draw a point that shows the unemployment rate and the inflation rate in
September. Label it A.
0.9+
4
8
10
12
Draw a point that shows the natural unemployment rate and the expected
Unemployment rate (percent of labor force)
inflation rate. Label it B.
>>> Draw only the objects specified in the question.
Draw the short-run Phillips curve that is consistent with these data. Label
it.
of
(Problem 3, Page 477) In a certain economy the expectations-augmented Phillips
curve is
π = π² − 2 (u – ū)
and ū= 0.06.
a. Graph the Phillips curve of this economy for an expected inflation rate of
0.10. If the Fed chooses to keep the actual inflation rate at 0.10, what will
be the unemployment rate?
b. An aggregate demand shock (resulting from increased military spending)
raises expected inflation to 0.12 (the natural unemployment rate is
unaffected). Graph the new Phillips curve and compare it to the curve you
drew in Part (a). What happens to the unemployment rate if the Fed holds
actual inflation at 0.10? What happens to the Phillips curve and the
unemployment rate if the Fed announces that it will hold inflation at 0.10
after the aggregate demand shock, and this announcement is fully believed
by the public?
c. Suppose that a supply shock (a drought) raises expected inflation to 0.12
and raises the natural unemployment rate to 0.08. Repeat Part (b).
Chapter 29 Solutions
Macroeconomics
Ch. 29.1 - Prob. 1RQCh. 29.1 - Prob. 2RQCh. 29.1 - Prob. 3RQCh. 29.1 - Prob. 4RQCh. 29.1 - Prob. 5RQCh. 29.2 - Prob. 1RQCh. 29.2 - Prob. 2RQCh. 29.2 - Prob. 3RQCh. 29.2 - Prob. 4RQCh. 29.2 - Prob. 5RQ
Ch. 29.2 - Prob. 6RQCh. 29.2 - Prob. 7RQCh. 29.3 - Prob. 1RQCh. 29.3 - Prob. 2RQCh. 29.3 - Prob. 3RQCh. 29.3 - Prob. 4RQCh. 29.3 - Prob. 5RQCh. 29.3 - Prob. 6RQCh. 29.4 - Prob. 1RQCh. 29.4 - Prob. 2RQCh. 29.4 - Prob. 3RQCh. 29.4 - Prob. 4RQCh. 29 - Prob. 1SPACh. 29 - Prob. 2SPACh. 29 - Prob. 3SPACh. 29 - Prob. 4SPACh. 29 - Prob. 5SPACh. 29 - Prob. 6SPACh. 29 - Prob. 7SPACh. 29 - Prob. 8SPACh. 29 - Prob. 9APACh. 29 - Prob. 10APACh. 29 - Prob. 11APACh. 29 - Prob. 12APACh. 29 - Prob. 13APACh. 29 - Prob. 14APACh. 29 - Prob. 15APACh. 29 - Prob. 16APACh. 29 - Prob. 17APACh. 29 - Prob. 18APACh. 29 - Prob. 19APACh. 29 - Prob. 20APACh. 29 - Prob. 21APACh. 29 - Prob. 22APACh. 29 - Prob. 23APACh. 29 - Prob. 24APA
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