What is the sacrifice ratio in the economy

Assignment Help Econometrics

Reference no: EM13184600

Suppose the economy has the Phillips Curve pi = pi^e - 0.25(u-.04).

a. Find the natural rate of uemployment

b. Graph the short run Phillips curve if the expected rate of inflation is 3 percent or 0.03

c. What is the sacrifice ratio in this economy?

d. If the central bank has a loss function of L(pi) = (pi)^2, what is the optimal level of inflation in this economy?

e. Given the loss function in d, what is the resulting long run rate of unemployment?

Reference no: EM13184600

Questions Cloud

Cold war affect the social and political climate : How did the Cold War affect the social and political climate in the United States during the 1950s? In particular, how do you explain Joseph McCarthy’s rise to power in and the popularity of his anti-communist crusade.

Is the ad curve upward-sloping flat or downward-sloping : In addition, pi* is the central bank's target level of inflation , and b is some positive parameter. This rule states that the central bank raises the real interest rate above its long-run level when inflation is above its target and lower when it..

Supplemental lifo disclosures and lifo reserve : The company uses the LIFO inventory method for external reporting and for income tax purposes but maintain its internal records using FIFO

Define the short run effects of a positive inflation shock : An inflation shock is a disturbance to the usual behavior of inflation that shifts the IA line. A supply shock is a change in the natural rate of output. Graph the long and short run effects of a positive inflation shock and a negative supply shoc..

What is the sacrifice ratio in the economy : Find the natural rate of uemployment b. Graph the short run Phillips curve if the expected rate of inflation is 3 percent or 0.03 c. What is the sacrifice ratio in this economy d. If the central bank has a loss function of L(pi) = (pi)..

Determine the inventory balance marcus : Determine the inventory balance Marcus would report in its August 31,2011 balance sheet and the cost of goods sold it would report in its August 2011 income statement

Types of mass or energy : Which of the following types of mass or energy is predicted to be most abundant by inflation and the Big Bang theory?

What would be appropriate monetary policy for the fed : Evaluate the 3 goals of the Fed, which are price stability, full employment and economic growth. Which one do you think is the most important goal for the Fed to focus on right now? Also, what would be appropriate monetary policy for the Fed to he..

Which independent variable has the smallest affect on gpa : It has been hypothesized that overall success for college freshmen as measured by grade point average (GPA) is a function of IQ scores (X1), hours spent studying each week (X2), and one's high school average (X3). Suppose the regression equation i..

User Account

All Pages