Economy the expectations-augmented philips curve

Assignment Help Business Economics

Reference no: EM131094736

In a certain economy the expectations-augmented Philips curve is: Π = Πe - 2(u-u*) u* = 0,06 (natural rate of unemployment)

A. Graph the Phillips curve of this economy for an expected inflation rate of 0,1. If the central bank chooses to keep the actual inflation at 0,1%, what will be the unemployment rate?. If the central bank unexpectedly increases inflation, what will happen to unemployment and why

B. A demand shock raises expected inflation to 0,12. Graph the new Phillips curve. What happens to unemployment rate if the central bank holds inflation at 0,1% after the demand shock?

c. Suppose a supply shock raises the expected inflation to 0,12 and natural rate of unemployment to 0,08. Repeat part B.

Reference no: EM131094736

Questions Cloud

How much output will each firm produce : Suppose there are n number of identical firms in a market. Each firms cost function is given by C = 648 + 8q^2, where q is the amount that an individual firm produces. This means that an individual firm's marginal cost is given by MC = 16q. How much ..

Discuss on how during period of financial crisis : Discuss on how during a period of financial crisis when funds cannot be raised easily or quickly, the fundamental values of some assets can depart from market prices. Explain how this relates to the distinction between loans and securities. Identify ..

Exchange economy with two consumers and two goods : Consider an exchange economy with two consumers and two goods. The consumption sets of the consumers are R_+^2. Each consumer has the same utility function u(x_1,x_2) = min{x_1, x_2}. Provide a complete characterization of all the allocations which a..

Marginal cost equals average variable cost when output : A competitive firm has the following short-run cost function: c(y) = y3 - 8y2 + 30y + 5. What is the firm’s marginal cost function? What is the firm’s average cost function? Marginal cost equals average variable cost when output is ----.

Economy the expectations-augmented philips curve : In a certain economy the expectations-augmented Philips curve is: Π = Πe - 2(u-u*) u* = 0,06 (natural rate of unemployment)

Asymmetric information and two types on consumers : Consider the basic Rothschild-Stiglitz model with asymmetric information and two types on consumers. A policymaker who has taken this class suggests that is might be beneficial to impose a flat tax on healthy people and distribute the tax revenue to ..

Two-part tariff by charging a price for membership : Consider a local golf course that prices using a two-part tariff by charging a price for membership and then charging per round of golf played. Individual demand for rounds of golf is given along with the corresponding marginal revenue curve.

Diminishing marginal utility will demand insurance : A person with diminishing marginal utility will demand insurance (i.e., will be willing to pay more to get insurance than (the negative of) the expected value of the loss lottery). Try to replicate our example of full insurance with an individual who..

Building model of the costs of production of electric power : There are at least two different possible approaches to the problem of building a model of the costs of production of electric power. What functional form would you recommend for estimating Model I? Be sure to write out a specific equation. What func..

User Account

All Pages