User Account

All Pages

Short-run and long-run phillips curves

Assignment Help Microeconomics
Reference no: EM132512386

Assume that the United States economy is in long-run equilibrium with an expected inflation rate of 6 percent and an unemployment rate of 5 percent. The nominal interest rate is 8 percent.

(a) Using a correctly labeled graph with both the short-run and long-run Phillips curves and the relevant numbers from above, show the current long-run equilibrium as point A.

(b) Calculate the real interest rate in the long-run equilibrium.

(c) Assume now that the Federal Reserve decides to target an inflation rate of 3 percent. What open-market operation should the Federal Reserve undertake?

(d) Using a correctly labeled graph of the money market, show how the Federal Reserve's action you identified in part (c) will affect the nominal interest rate.

(e) How will the interest rate change you identified in part (d) affect aggregate demand in the short run? Explain.

(f) Assume that the Federal Reserve action is successful. What will happen to each of the following as the economy approaches a new long-run equilibrium?

(i) The short-run Phillips curve. Explain.

(ii) The natural rate of unemployment

Reference no: EM132512386

Questions Cloud

Describe the current exchange rate regime : Briefly describe the current exchange rate regime adopted by Hong Kong. How does Hong Kong maintain exchange rate stability when there are capital inflows
United states has large trade deficits : United States has large trade deficits with many countries. Discuss at least two reasons (positive economic analysis) for the trade deficit.
Aggregate demand or supply during a recession : Should the government influence aggregate demand or supply during a recession (or during natural disasters, pandemics, wars)? Why? Should the government
Graph the current pandemic situation for a country : Graph the current pandemic situation for a country on the AD-AS model.
Short-run and long-run phillips curves : Using a correctly labeled graph with both the short-run and long-run Phillips curves and the relevant numbers from above, show the current long
Name two macroeconomic variables that decline : Name two macroeconomic variables that decline when the economy goes into a recession. Name one macroeconomic variable that rises during a recession.
Central banks are independent of rest of government : 1. Hyperinflations are extremely rare in countries whose central banks are independent of the rest of the government.
Explain how expectations affect consumption : 1. Explain how expectations affect consumption. 2. Explain how a change in expected future output could affect current output.
Complicate the conduct of monetary policy : In what way does the existence of near money complicate the conduct of monetary policy? How has the Federal Reserve responded to this complication?

Reviews

Write a Review

Microeconomics Questions & Answers

  The free rider problem

Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.

  Failure of the super committee is good thing for economy

Some commentators have argued that the failure of the “Super committee” is good thing for the economy?  Do you agree?

  Case study analysis about optimum resource allocation

Case study analysis about optimum resource allocation: -  Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..

  Fixed cost and vairiable cost

Questions:  :   Which of the following are likely to be fixed costs and which variable costs for a chocolate factory over the course of a month?  Explain your choice.

  Problem - total cost, average cost, marginal cost

Problem - Total Cost, Average Cost, Marginal Cost: -  Complete the following table of costs for a firm.  (Note: enter the figures in the  MC   column  between  outputs of  0 and 1, 1 and 2, 2 and 3, etc.)

  Oligopoly and demand curve problem

Problem based on Oligopoly and demand curve,  Draw and explain the demand curve facing each firm, and given this demand curve, does this mean that firms in the jeans industry do or do not compete against one another?

  Impact of external costs on resource allocation

Explain the impact of external costs and external benefits on resource allocation;  Why are public goods not produced in sufficient quantities by private markets?  Which of the following are examples of public goods (or services)? Delete the incorrec..

  Shifts in demand and movements along the demand curve

Describe the differences between shifts in demand and movements along the demand curve. What are the main factors which can shift the demand curve? Explain why they cause the demand curve to shift. Use examples and draw graphs to support your discuss..

  Article review question

Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:

  Long-term growth, international trade & globalization

Long-term Growth, International Trade & Globalization:- This question deals with concepts such as long-term growth, international trade and globalization. Questions related to trade deficit, trade surplus, gains from trade, an international trade sce..

  European monetary union (emu) in crisis

"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"

  Development game “settlers of catan”

Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd