Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Q. Augmented Phillips curve?
Remember that Phillips curve, as it was incorporated into the Keynesian model, presumed a stable relationship between wage inflation andunemployment: for a given level of unemployment (say U = 5%), a given level of wage inflation would apply (say Πw = 4%). As U increased, Πw would fall and vice versa.
Mathematically, Phillips curve may be explained by a decreasing function f as Πw = f(U). In neo-classical synthesis, expected inflation is added and Πw = f(U) + Πe. To justify this amendment, imagine U = 5% and Πw = 4% (so that we are on Phillips curve) and expected inflation rises from 4% to 6%. As employees care about real wages, it's reasonable to presume that Πw will increases as well (for a given U) and Phillips curve will shift upwards.
Figure: The augmented Phillips curve
According to synthesis, Phillips curve should be drawn for a given value of Πe and it should be shifted upwards (downwards) as Πe increases (decreases). When position of Phillips curve is allowed to depend on Πe, is known as augmented Phillips curve (or expectations-augmented Phillips curve). This amendment to Phillips curve is actually a consequence of a criticism of conventional Phillips curve and Keynesian model from the late 1960's (Keynesian - Monetarism debate).
Consider an economy that having only of those who bake bread and those who make its ingredients. Assume that this economy's production is as follows: 1 million loaves of bread
Explain the chain reactions (primary and secondary effects) and show graphs of the following variables: (i) taxes increases, (ii) government spending increases and (iii)repo ra
. (40 points) Consider two consumers, A and B. A and B both want perfect consumption smoothing (c = cf) and both have no current wealth. However, the two consumers have different i
Use the laws of supply and demand to explain why the cost to heat our homes and businesses goes up in the winter time. Be sure to explain your answer fully. At least two paragraphs
COMPONENTS OF TRADE POLICY: External sector reforms beginning with 1991 included dismantling of trade restrictions along with tariff rationalization, a move towards current a
Aggregate Demand Policies Both fiscal and monetary policy changes shift the AD curve. Let us see how, starting with a fiscal expansion. See figure 6.2. In the upper panel, the
The rent control agency of New York City has found that market demand is QD=100-5P With quantity measured in tens of though sands of apartments and price, the monthly rental rate,
Sustainability of Current Account Deficit: Theoretically speaking, a current account deficit can be sustained as long as the growth rate of national income exceeds the rate of
Monetary Policy Vs. Fiscal Policy According to monetarists, money is very important in determining the level of aggregate demand and that monetary policy is very potent. In con
If demand increases and the supply increases also, then what will happen to the new equilibrium price and equilibrium quantity? Explain what is happening with the curves and how pr
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!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd