For this question, assume that the Phillips curve equation is represented by the following equation: πt - πt-1 = (m + z) - αut. A reduction in the unemployment rate will cause A) a reduction in the markup over labor costs (i.e., a reduction in m). B) an increase in the markup over labor costs. C) an increase in the inflation rate over time. D) a decrease in the inflation rate over time. E) none of the above
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For this question, assume that the
πt - πt-1 = (m + z) - αut. A reduction in the
A) a reduction in the markup over labor costs (i.e., a reduction in m).
B) an increase in the markup over labor costs.
C) an increase in the inflation rate over time.
D) a decrease in the inflation rate over time.
E) none of the above
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- Use the following Phillips curve equation to answer this question: πt - πt-1 = (m + z) - αut. Which of the following will cause an increase in the natural rate of unemployment? A) a reduction in m B) an increase in z C) an increase in α D) a reduction in expected inflation E) none of the aboveAssume that expected inflation is based on the following: πet = θπt-1. If θ = 1, we know that A) a reduction in the unemployment rate will have no effect on inflation. B) low rates of unemployment will cause steadily increasing rates of inflation. C) the actual unemployment rate will not deviate from the natural rate of unemployment. D) the Phillips curve illustrates the relationship between the level of inflation rate and the level of the unemployment rate.9) The original Phillips curve implied that: A) the markup over labour costs is zero. B) the expected inflation rate is equal to last year's inflation rate. C) a lower rate of unemployment causes an increase in the rate of inflation. D) the inflation is always zero. E) the expected inflation is always zero.
- An economy has the following equation for the Phillips Curve: π = Eπ − 0.5(u − 6)People form expectations of inflation by taking a weighted average of the previous two years of inflation: Okun’s law for this economy is: Eπ = 0.7π−1 + 0.3π−2 (Y −Y−1)/(Y-1)=3.0−2.0(u−u−1) Th economy begins at its natural rate of unemployment with a stable inflation rate of 5 percent. 1. What is the natural rate of unemployment for this economy? 2. Graph the short-run tradeoff between inflation and unemployment that this economy faces. Label the point where the economy begins as A. 3. A fall in aggregate demand leads to a recession, causing the unemployment rate to rise 4 percentage points above its natural rate. On your graph, label the point the economy experiences that year as point B.Suppose the Phillips curve in Country A is estimated to be ??=???−0.25(??−?∗?)πt=πte−0.25(ut−ut∗)(supplied in picture) The natural rate of unemployment in the year 2020 equals 3%. Inflation in the year 2020 is expected to be around 1%. The Okun’s coefficient in Country A equals 2. The central bank of Country A is considering three possible monetary policy scenarios for the year 2020. Scenario 1: the central bank performs a monetary contraction, and the inflation rate becomes 0.5%. Scenario 2: the central bank performs a monetary expansion, and the inflation rate becomes 1.5%. Scenario 3: the central bank keeps monetary policy unchanged, and the inflation rate matches expected inflation and equals 1%. For each of these policy scenarios, 1) Determine the corresponding rate of cyclical unemployment in 2020 2) Determine the actual unemployment ??ut that would result in 2020 3) Use Okun’s law to determine the corresponding…Consider an economy with a natural unemployment rate, u, of 4%. The expectations-augmented Phillips curve is: = - 0.5(u - ū) Assume that Okun's Law holds so that a 1 percentage point increase in the unemployment rate maintained for one year reduces GDP by 2% of full employment output. Note: Okun's Law can be expressed as: :-2(u-i) How much cyclical unemployment is necessary to reduce inflation by 3 percentage points? Using Okun's Law, compute sacrifice ratio. (Enter an integer number, use only positive values)
- Consider an economy with a natural unemployment rate, u, of 7%. The expectations-augmented Phillips curve is: 1= - 0.5(u -ū) Assume that Okun's Law holds so that a 1 percentage point increase in the unemployment rate maintained for one year reduces GDP by 2% of full employment output. Note: Okun's Law can be expressed as: *--2(u-ü) What is the long-run Phillips curve: OA. Inflation rate 8- OB. OC. O D. none of the answers is correct Inflation rate Inflation rate 6- 6- 6-Consider an economy with a natural unemployment rate, u, of 9%. The x = x - 2(u - ū) Assume that Okun's Law holds so that a 1 percentage point increase in the unemployment rate maintained for one year réduces GDP by 2% of full employment output. Note: Okun's Law can be expressed as: Y-Y expectations-augmented Phillips curve is: = -2(u - u) a. Consider a two-year disinflation. In the first year actual inflation, , is 13% and expected inflation, xº, is 17%. What is the first year unemployment rate? % (Enter your response as a percentage rounded to one decimal place)Which of the following would shift the long-run Phillips curve to the left? a) A change in the expected rate of inflation. b) A natural disaster which temporarily disrupts production. c) Improved technology which increases labour demand. d) A rise in the price of imported inputs.
- Suppose that the level of unemployment in the economy is determined by the follow equation: U = 7.55 1.88*(i - ie) Where U is the unemployment rate, i is the actual inflation rate, and it is the expected inflation rate. All variables are entered in percentage form (e.g. if inflation is 30.57%, you plug in 30.57 for i, not 0.3057). Last year, the inflation rate was 7.87%, and people have adaptive expectations. What does the inflation rate need to be this year in order for the unemployment rate to be 2.81%? Note: Everything is already in percentage form. You do not need to multiply or divide by 100 at any point. Enter in your answer as it is calculated in the equation. Round your final answer to two decimal places.Assume the Phillips curve is given by tt = 2nt-1 + Y^t + zt where t is inflation in period t, Y^ t is the output gap in period t, and zt is cost-push inflation in period t. In period 0, inflation is 4%. In period 1, z1 = -0.01 due to an unexpected productivity increase. For all other periods, zt = 0. The output gap is zero all the time. (a) What is inflation in period 1? (b) What is inflation in period 2? (c) What is inflation in period 3? %3DThe Phillips curve in Lowland takes the form of π = 0.04 − 0.6(u − 0.05), where π is the actualinflation rate and u is the unemployment rate. The Phillips curve in Highland takes the form ofπ = 0.08 − 0.4(u − 0.05). The current unemployment rate in both countries is 9 percent (0.09). For both countries, analyze the impact on inflation of a 2% decrease in unemployment? In which country will policymakers face a bigger trade-off if they try to reduce unemployment in the shortrun? Why