Compute unemployment and inflation in years

Assignment Help Econometrics
Reference no: EM131145798

The effects of a permanent decrease in the rate of nominal money growth

Suppose that the economy can be described by the following three equations:

2242_9cd49dbb-1486-4aea-9f5f-c1806d4b4815.png

a. Reduce the three equations to two by substituting gyt from the aggregate demand equation into Okun's law. (Okun's law was presented in Chapter 2.) Assume initially that ut = ut-1 = 5%, gmt = 13%, and πt = 10%.

b. Explain why these values are consistent with the statement "Inflation is always and everywhere a monetary phenomenon." Now suppose that money growth is permanently reduced from 13% to 3%, starting in year t.

c. Compute (using a calculator or a spreadsheet program) unemployment and inflation in years t, t + 1,.... t + 10.

d. Does inflation decline smoothly from 10% to 3%? Why or why not?

e. Compute the values of the unemployment rate and the inflation rate in the medium run.

f. Is the statement that "Inflation is always and everywhere a monetary phenomenon" a statement that refers to the medium run or the short run?

Reference no: EM131145798

Questions Cloud

Disinflation means that the rate of inflation is negative : The expectations-augmented Phillips curve is consistent with workers and firms adapting their expectations after the macroeconomic experience of the 1960s.
What are the enterprise value to ebita : What are the enterprise-value-to-EBITA multiples for both companies? Does higher growth lead to a higher multiple in this case?
Evaluate the organization vision statement : Create a 12- to 15-slide Microsoft PowerPoint presentation for a Mini-Strategy using the Mini-Strategy Outline. Include the following in your outline: Evaluate the organization's vision statement
What does it mean for the trials to be independent in a bino : What does it mean for the trials to be independent in a binomial experiment?
Compute unemployment and inflation in years : Is the statement that "Inflation is always and everywhere a monetary phenomenon" a statement that refers to the medium run or the short run?
What the different statistics of the summary output mean : Analyze the attached data and develop a model that predicts math scores from other scores. Use regression analysis in excel and summarize what the different statistics of the summary output mean.
Ecognize the brand name as well as the probability : A brand name has a recognition rate of 90%. If the owner of the brand wants to verify this with a small sample of 10 randomly selected consumers find the probability that 9 of the 10 consumers recognize the brand name as well as the probability that ..
What are the responsibilities of the accountants : What are the responsibilities of the accountants at Arthur Andersen? To whom did they owe these responsibilities
Which savings account offers the higher apy : savings account A compounds interest semiannually, while savings account B compounds interest quarterly. Which savings account offers the higher APY?

Reviews

Write a Review

 

Econometrics Questions & Answers

  What quantity of bmws should the firm sell in each market

Suppose that BMW can produce any quantity of cars at a constant marginal cost equal to $20,000 and a fixed cost of $10 billion. You are asked to advise the CEO as to what prices and quantities BMW should set for sales in Europe and in the United S..

  Derive the expression for marginal rate of substitution

How much of each good will he demand in this case? (The price of x1 is 3$ but his income has decreased)D) Calculate utilities obtained by bundles without tax and with income tax. Draw Jack's best bundles in a graph. (Budget curves, best bundles an..

  Determine what is the actual payoff

Assume the interest rate (and your discount rate) is 10 percent what is the actual payoff The correct answer is $13,518,048 (rounded to the nearest dollar) But I keep getting $12,289,134 (rounded to the nearest dollar)

  Find what is the present worth of the project

An asset in the 5-yr. MACRS property class cost $100,000 and has no salvage value after six years of use. The asset will generate $300,000 in annual revenues and will require $100,000 in annual labor costs and $50,000 in annual materials costs.

  How would you as auctioneer-seller design an auction

If some auction participants for crude oil field leases have estimates that the oil in the ground is worth $1.2 million, $1.3 million, or $1.5 million with certainty; and other auction participants have estimates that the same oil field lease is w..

  What is market-clearing price for discriminating monopolists

A discriminating monopolist faces the demand schedule Pmkt = 225 - Q and MC = 125 a) What is the market-clearing price for the discriminating monopolist b) How much will the monopolist produce c) What is the net profits of the monopolist

  What r the mean and variance of the distribution

a broadcasting executive is reviewing the prospects for a new television series,according to her judement , the probability is 0.25 that the show will achieve a rating higher than 17.8, and the probability is 0.15

  Compute the capitalized cost assuming an interest rate

At the end of 5 years, the compactor will be replaced by another identical compactor (Cynthia hopes to be so lucky.) Assuming that the City will own and operate a landfill for perpetuity and that they will need a compactor

  Provide an economic interpretation for each equation

There is a single difference: we've changed the exponent on At in the production function of the output good so that there is now a diminishing marginal product to ideas in that sector. 1. Provide an economic interpretation for each equation.

  Describe the shape of isoquant decreasing returns to scale

Suppose the number of points on an economics midterm (P) can be characterized by the following production function: P = 10H - 4B where H is the number of hours spend studying and B is the number of beers in the week prior to the midterm.

  How many dvds should it order from which supplier

A television station is considering the sale of promotional DVDs. I can have the DVDs produced by one of two suppliers. Supplier A will charge the station a set-up fee of $1,200.00 plus $2.00 for each DVDs; supplier B has no set-up fee and will ch..

  How does your theme connect to your audience

Consider the expectations for the sub-genre you have chosen. What speeches have you seen in this sub-genre, how did they meet these expectations, and how can you apply what you have seen to your speech?

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!

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