Macroeconomics (7th Edition)
7th Edition
ISBN: 9780134738314
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 8, Problem 8.3.6PA
To determine
Nominal
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Inflation Can Act as a Safety Valve
Workers will more readily accept a real wage cut that arises from an increase in the price level than a cut in their nominal wage rate.
Source: FT.com, May 28, 2009
Explain why inflation influences a worker’s real wage rate. Why might this observation be true?
Briefly describe what is meant by the non-accelerating inflation rate of unemployment (NAIRU)
In early 2017, policymakers at the Federal Reserve forecast that real GDP during 2017 would increase faster than potential GDP and that the inflation rate for the year would be about 1.9 percent.
Source: Federal Open Market Committee, "Advance Release of Table 1 of the Summary of Economic Projections to be Released with the FOMC Minutes," March15, 2017.
Fill in the missing values in the table with estimates that are consistent with these forecasts. Assume that the growth rate for real GDP between 2016 and 2017 is 0.32 percentage points higher than the percentage change in potential output between those years (rounded to two decimal places).
2016
2017
Real GDP
$16.7 trillion
$nothing
trillion
Potential GDP
$16.9 trillion
$17.1 trillion
GDP Deflator
111.5
nothing
(Enter your responses rounded to one decimal place.)
Chapter 8 Solutions
Macroeconomics (7th Edition)
Ch. 8 - Prob. 8.1.1RQCh. 8 - Prob. 8.1.3RQCh. 8 - Prob. 8.1.4RQCh. 8 - Prob. 8.1.5RQCh. 8 - Prob. 8.1.6PACh. 8 - Prob. 8.1.7PACh. 8 - Prob. 8.1.8PACh. 8 - Prob. 8.1.9PACh. 8 - Prob. 8.1.10PACh. 8 - Prob. 8.1.11PA
Ch. 8 - Prob. 8.1.14PACh. 8 - Prob. 8.2.1RQCh. 8 - Prob. 8.2.2RQCh. 8 - Prob. 8.2.3RQCh. 8 - Prob. 8.2.4PACh. 8 - Prob. 8.2.9PACh. 8 - Prob. 8.2.10PACh. 8 - Prob. 8.3.1RQCh. 8 - Prob. 8.3.2RQCh. 8 - Prob. 8.3.3RQCh. 8 - Prob. 8.3.4PACh. 8 - Prob. 8.3.5PACh. 8 - Prob. 8.3.6PACh. 8 - Prob. 8.3.7PACh. 8 - Prob. 8.3.8PACh. 8 - Prob. 8.3.9PACh. 8 - Prob. 8.3.10PACh. 8 - Prob. 8.4.1RQCh. 8 - Prob. 8.4.3RQCh. 8 - Prob. 8.4.4PACh. 8 - Prob. 8.4.6PACh. 8 - Prob. 8.4.7PACh. 8 - Briefly discuss the accuracy of the following...Ch. 8 - Prob. 8.1RDECh. 8 - Prob. 8.2RDECh. 8 - Prob. 8.6RDECh. 8 - Prob. 8.7RDE
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- If inflation rises unexpectedly by 5, indicate for each of the following whether the economic actor is helped, hurt, or unaffected: A union member with a COLA wage contract Someone with a large stash of cash in a safe deposit box A bank lending money at a fixed rate of interest A person who is not due to receive a pay raise for another 11 monthsarrow_forwardSome politicians have suggested tying the minimum wage to the consumer price index (CPI). Using the AD/AS diagram, what effects would this policy most likely have on output, the price level, and employment?arrow_forwardEconomists expect that as the labor market continues to tighten going into the latter part of 2015 that workers should begin to expect wage increases in 2015 and 2016. Assuming this occurs and it was the only development in the labor market that year, how would this affect the AS curve? What if it was also accompanied by an increase in worker productivity?arrow_forward
- Describe what is the Specific inflation rate? Give an example?arrow_forward( please solve ASAP definitely I will give you thumbs up . Thanks you ) Rosa received a 2% raise at work and her coworker, Amy, received a 5% raise. Inflation is currently 2.6%. Did Rosa’s standard of living increase? Briefly explain your answer. List two flaws with using the consumer price index to measure inflation.arrow_forward
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