Describe the Phillips curve (O.G., not modified/expectations) and draw a graph of the relationship. How good was this model with 1960’s data vs with data from 1970-2000’s? Describe the Lucas critique.
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- How the Phillips Curve model (and associated diagram) could be modified to take account of shifts in the relationship over time?How do long-term and short-term Phillips curves compare for the unemployment and inflation ratesHow did the Phillips Curve look differently between pre-pandemic period vs. after-pandemic (recovery) period? What were the possible explanations?
- The axes below are for showing the Phillips curve model. The Phillips curve shows the trade off between (Select one: unemployment and economic growth/inflation and interest rates/ unemployment and inflation/ real GDP and the price level/ exports and imports/ wages and productivity) The long run Phillips curve would most likely go through points (Select one: ADF/ BEG/ DG/ ABC/ CE) Suppose that both axes are numbered 0 to 10. In June 2006 the NZ economy was most likely at about point (Select one: A/B/C/D/E/F/G). Following the global financial crisis, by June 2010 the NZ economy was most likely at approximately point (Select one: A/B/C/D/E/F/G) The key idea behind the long run Phillips curve is that (Select one below) 1. there is a long term trade off between the two variables on the axes but no short run trade off 2. in the short run lower values of the x-axis variable can be achieved at the expense of higher values of the y-axis variable 3. there is no long run trade off at all…The effect of expectations on the Phillips curve is considered a Phelps’s primary contribution. We can use a modified version of the Phillips curve to illustrate the point that Phelps was trying to make. The key difference is that the position of this new kind of curve changes when the inflation rate that people expect changes. When actual inflation changes and expected inflation stays the same, you move along the curve. But when expected inflation changes, the entire curve shifts. Since expectations shift this curve, economists call it an expectations-augmented Phillips curve. The following graph shows a Phillips curve for a hypothetical economy where the natural rate of unemployment is 8%. Initially, the expected inflation rate equals the actual inflation rate of 4%. Use the Phillips curve on the graph to answer the questions that follow. Consider a scenario where the inflation rate unexpectedly rises from 4% to 5%. Wages rise to match the new level of inflation. Workers believe that…True or false? Phillips curve represents a structural relationship between unemployment and inflation that never changes.
- Draw a short run Phillips curve and show the slope of the curve and then explain what it implies for the policy makers? Can policymakers exploit the Phillips curve relationship by trading more inflation for less unemployment in the short-run? In the long run? Explain both the Monetarist (Classical) and Keynesian points of view.Does the Phillips curve have a positive or negative slope? Explain how this slope is derived. When will an increase in aggregate demand not result in lower unemployment rates in the short run?Graphically derive short run Phillips curve with the help of aggregate demand and supply and demand.
- The Phillips Curve equation of the DAD-DAS model is nt = Et-1nt + p(Yt – Ýt) + vt. According to this equation, firms raise prices when output is ____________ the natural level of output, or equivalently, when the unemployment rate is _________ the natural rate of unemployment. a. above; above b. above; below c. below; below d. below; aboveDiscuss what the long-run Phillips curve looks like in the neoclassical perspective, and why the trade-off between inflation and unemployment disappears. From this perspective, what is the best government policy response to favorable economic conditions in the long run?What is meant by the Phillips Curve “tradeoff”? Group of answer choices Demand pull inflation results in lower unemployment. High inflation results in high unemployment. High unemployment eventually returns to normal. High inflation eventually slows down.