Graphing the short run philips curve

Assignment Help Macroeconomics

Reference no: EM1313821

Suppose that natural real GDP is constant. For every 1 percent increase in the rate of inflation above its expected level, firms are willing to increase real GDP by 2 percent. The output ratio is initially 100 and the inflation rate equals 2 percent.

a. Based upon the preceding information, draw the short-run Phillips Curve.

b. What is the growth rate of nominal GDP in the economy?
An adverse supply shock raises the inflation rate associated with every output ratio by 3 percentage points.

c. Draw the new short-run Phillips Curve.

d. The government chooses to follow a neutral policy in response to this shock. What will be the growth rate of nominal GDP? What will be the new rate of inflation? What will be the output ratio?

e. If the government chose to follow an accommodating policy, what would be the new inflation rate? The output ratio? The growth rate of nominal GDP?

Reference no: EM1313821

Questions Cloud

Inverse delivery curve substitutes or complements : elling price of another product Y in dollars per unit. The inverse delivery curve. Conclude whether X also Y are substitutes or complements.

Inflation and output ratio : Suppose that natural real GDP is constant. For every 1 percent increase in the rate of inflation above its expected level, firms are willing to increase real GDP by 2 percent.

Applications of several observational study designs : Applications of Different Observational Study Designs' indicating for every objective under pertinent study design.

Computation of free cash flow : Computation of free cash flow and Given the following financial statements for ACME Corporation, what is the company's free cash flow for 2004?

Graphing the short run philips curve : Suppose that natural real GDP is constant. For every 1 percent increase in the rate of inflation above its expected level, firms are willing to increase real GDP by 2 percent.

Compute the present value of the various annuities : Compute the Present value of the various annuities and suppose you are to receive a stream of annual payments

Computation of cash flow from financing activities : Computation of cash flow from financing activities using given data and Given the following financial statements for ACME Corporation, and assuming that ACME paid a common dividend of $45,000 in 2004, what is the company\'s financing cash flow for ..

Creating the decision tree : Create the corresponding decision tree and make recommendations.

Advise johnny to demand from the record organization : Illustrate what is the marginal income for each 10,000 increase in the quantity sold. Illustrate what recording fee would you advise Johnny to demand from the record organization.

User Account

All Pages