Use the following information to answer the next two questions.. Consider the Phillips curve =-(U-U*) with E-1.2, u*-0.06, and nº 0.06. Suppose that uo-u". Suppose the current government pressures the RBA to bring the economy to an unemployment rate of 0.04 for the next period. With adaptive expectations, what inflation rate should the RBA target? (enter "x" without the quotes if there is not an inflation rate that can produce the target unemployment.) Report your answer as a decimal fraction up to two decimal points.
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- According to the figure below, Inflation Rate (percent) 8 7 6 3 2 1 0 b. PC2? PC2 % 1 % 2 PC₁ 3 4 Rightward AS shifts cause leftward Phillips curve shifts. 5 6 What inflation rate would occur if the unemployment rate were 5 percent, with Instructions: Round your responses to the nearest 0.5 percent (e.g., 1.0, 1.5, 2.0). a. PC₁? Unemployment Rate (percent) 7 8. Explain how the original Phillips curve was transformed into the expectations augmented Phillips curve. Using the latter, describe why any expansionary policy would not be effective in the long run and move the macro-economy back to the Natural Rate of Unemployment (NRU).Suppose that = 1° , and the Phillips curve equation for the economy is below: T = 4.5% - 0.2u, If inflation (T,) is 3.5%, then u, is 22.5 %. v tend to decrease If the actual unemployment rate in this economy is equal to 6%, the rate of inflation wi tend to increase be zero remain constant
- The Phillips curve is given by I-T =0.1-2u The inflation is a year becomes the expected inflation in the next year. The unemployment rate is kept by the fed at 4%. If the inflation in the last year was 0, then the inflation in the next year will be: A. 1% B. 2% C. 3% D. 4% Answer 04:29 PM 19-10-2021er In 2017, nearly 3.5% of Vietnamese imports constituted of refined oil. If the price of oil rises significantly, what effect would this have on the Phillips curve in Vietnam? Real interest rate Unexpected inflation Decreased Interra Output gep cand Output gap Output gep Unexpected inflation ang costs Output gapThe table below reports the actual inflation rate from 2016 to 2020. Complete the table, assuming people form expectations adaptively. Give all answers to two decimals, Actual inflation rate Expected inflation rate Error Year 2016 3% 3% 0% 5.50% a) % b) % 2017 6.00% 5.50% c) 2018 4.00% d) 2.00% 2019 2020 2.00% e) Look back at the table. Assuming people form expectations adaptively, which of the following statements are correct? Choose one or more: OA Monetary policy can reduce unemployment only if the policy is expected. OB. When inflation is increasing from year to year, people tend to overestimate inflation. OC. When inflation is decreasing from year to year, people tend to overestimate inflation. O D. When inflation is decreasing from year to year, people tend to underestimate inflation. OE When inflation is increasing from year to year, people tend to underestimate inflation.
- The Phillips curve is given by T, – T; = 0.1– 2u, The inflation is a year becomes the expected inflation in the next year. The unemployment rate is kept by the fed at 4%. If the inflation in the last year was 0, then the inflation in the next year will be: A. 1% В. 2% С. 3% D. 4% Answer O A O B DUse the following information to answer the next two questions. Consider the Phillips curve with e=1.2, u*-0.06, and n--0.06. Suppose that uo-u*. Suppose the current government pressures the RBA to bring the economy to an unemployment rate of 0.03 for the next period. With adaptive expectations, what inflation rate should the RBA target? (enter "x" without the quotes if there is not an inflation rate that can produce the target unemployment.) Report your ans as a decimal fraction up to two decimal points.A. What assumptions did Thomas Sargent make when he claimed that inflation is always and everywhere a fiscal phenomenon?" B. Why is it appropriate in the book's short-term model for the author to use the Phillips Curve as an Aggregate Supply curve? Does it capture the working of the labor market as well as an AS curve based, say, on sticky wages? C. Provide an example of the book's short-run model being based on "microfoundations."
- 1 Inflation in the period t in the economy is described by the following function Tt -0.3 + 0.06u, + T where T; - inflation in the period t, ut - unemployment in the period t. Inflation expectations are formed adaptively: T = 0.7Tt-1 + 0.37_1, where T is the expected inflation in the period t. Let's assume that initially, in the time period t is equal to TO reduction of the inflation rate to the level of 0.05, starting from the year t: unemployment rate in year t = 0 and in year t = 1. 0, the inflation rate coincides with the level of inflationary expectations and T = 0.1. The Central Bank is conducting a policy of permanent (once and for all) 1. Calculate theThe following graph plots the short-run and long-run Phillips curves (SRPC and LRPC, respectively) for an economy currently experiencing long-run macroeconomic equilibrium at point A, where the natural unemployment rate is 6% and the inflation rate is 8% per year. INFLATION RATE (Percent) 20 18 16 14 12 2 10 8 0 1 2 LRPC Y-Intercept: None 5 A 6 3 4 7 UNEMPLOYMENT RATE (Percent) B 9 SRPC 10 ?Assume that inflation falls significantly below expectations. Diagramboth the short-run and long-run effects on employment using a PhillipsCurve diagram. What changes in this model to allow the return to long-runequilibrium?