Question

In the economy of Orange this year, the natural rate of unemployment is 5% and the...

In the economy of Orange this year, the natural rate of unemployment is 5% and the expected inflation rate is 4%.

Draw and clearly label a long run Phillips curve and a short run Phillips curve to show this situation. Be sure to label the axes. If asked for numerical answers, use the grid lines in the graph and round to the nearest .5.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

We have the following information

Natural rate of unemployment = 5%

Expected rate of inflation = 4%

Phillips curve is given by the following equation

π = πe – ϵ(u – u*)

In the above

π = Actual inflation

πe = Expected inflation

u = Actual unemployment rate

u* = Natural rate of unemployment rate

ϵ = Measures the responsiveness of inflation to unemployment

π = 0.04 – ϵ(u – 0.05)

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose that an economy has the Phillips Curve If the economy has the Non-Accelerating Inflation Rate...
Suppose that an economy has the Phillips Curve If the economy has the Non-Accelerating Inflation Rate of Unemployment as 5%, demonstrate in the Phillips Curve figure the short-run and long-run values on inflation and unemployment. Make sure to include specific numerical values.
Suppose that in 2020, the natural rate of unemployment is 5% and the actual rate of...
Suppose that in 2020, the natural rate of unemployment is 5% and the actual rate of unemployment is also 5%. Also inflation equals 4% and people expect inflation to be 4% next year (and all years thereafter). Using the Phillips curve logic, suddenly there is a rise in aggregate demand (maybe due to a jump in investment or government spending, maybe a tax cut.) A. in the short run by 2021, what happens to inflation and unemployment ? Explain why...
Question) If the natural rate of unemployment falls, a. both the short-run Phillips curve and the...
Question) If the natural rate of unemployment falls, a. both the short-run Phillips curve and the long-run Phillips curve shift. b. only the short-run Phillips curve shifts. c. only the long-run Phillips curve shifts. d. neither the short-run nor the long-run Phillips curves shift. Question) If the long-run Phillips curve shifts to the right, then for any given rate of money growth and inflation the economy has a. higher unemployment and lower output. b. higher unemployment and higher output. c....
Suppose that an economy has the Phillips Curve π=π↓t-1 -0.5(u-u^n) If the economy has the Non-Accelerating...
Suppose that an economy has the Phillips Curve π=π↓t-1 -0.5(u-u^n) If the economy has the Non-Accelerating Inflation Rate of Unemployment as 5%, demonstrate in the Phillips Curve figure the short-run and long-run values on inflation and unemployment. Make sure to include specific numerical values.
Eurozone unemployment rose to 10.7 percent. At the same? time, Eurozone inflation unexpectedly rose to 2.7...
Eurozone unemployment rose to 10.7 percent. At the same? time, Eurozone inflation unexpectedly rose to 2.7 percent a?year, up from the previous? month's 2.6 percent a year. ?Source: Huffington Post?, March? 1, 2012 A very high unemployment rate can be accounted for by the Phillips curve model by all of the following except?_______. A. a movement down along the? short-run Phillips curve if there is no change in the natural unemployment rate B. a rightward shift of the? long-run Phillips...
Suppose the short run Phillips Curve is given by: Inflation = Expected Inflation +.2 -4*Unemployment Rate...
Suppose the short run Phillips Curve is given by: Inflation = Expected Inflation +.2 -4*Unemployment Rate        Assume that initially, people expect zero inflation. Draw the short run Phillips Curve and the long run Phillips Curve on a graph On the graph, represent what would happen in the short run if the government decided to run 4% inflation (setting inflation =0.04). On the graph, represent what would happen in the long run if the government decided to run 4% inflation.
Suppose that the natural rate of unemployment equals 6%, and the public expect inflation to equal...
Suppose that the natural rate of unemployment equals 6%, and the public expect inflation to equal 4 %, and the coefficient a in PC equation = 0.4. What is the unemployment rate when the actual inflation equals 2%? What if the actual inflation rate equals 10%? During the 1990s, we observed the co-existence of low inflation and low unemployment. One of the arguments given by macroeconomists is that the expected inflation was lower than usual during the 1990s. Suppose now...
30. Suppose that the natural rate of unemployment equals 6%, and the public expect inflation to...
30. Suppose that the natural rate of unemployment equals 6%, and the public expect inflation to equal 4 %, and the coefficient a in PC equation = 0.4. a. What is the unemployment rate when the actual inflation equals 2%? What if the actual inflation rate equals 10%? b. During the 1990s, we observed the co-existence of low inflation and low unemployment. One of the arguments given by macroeconomists is that the expected inflation was lower than usual during the...
Please draw a fully-labeled Short-Run Phillips Curve with an inflation rate of 2% and unemployment rate...
Please draw a fully-labeled Short-Run Phillips Curve with an inflation rate of 2% and unemployment rate of 7% clearly labeled. Now on the same graph, show the effects on inflation and unemployment of an increase in the price of oil brought on by political strife in the Middle East, Venezuela and Eastern Europe (a negative supply shock).
When the economy is producing at an output level below the potential output, the unemployment rate...
When the economy is producing at an output level below the potential output, the unemployment rate is above the natural rate of unemployment. the short-run aggregate supply curve will slowly shift to the left when wages start to adjust. the intersection of the short-run aggregate supply curve and the aggregate demand curve is to the right of the long-run aggregate supply curve. the economy might be at the long-run equilibrium. Which of the following is not a determinant of the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT