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The Phillips curve is given by
π = πe- 0.5(u - 8) + ν,
where ν is a supply shock.
Price expectations are based on adaptive expectations:
πe = π-1,
where π-1 is last year's rate of inflation.
Initially, expected inflation is 4 percent and the supply shock is zero. Answer the following questions:
(a) If expected inflation equals actual inflation, what is the rate of unemployment?
(b) Now suppose in the following year, oil price shocks result in inflation taking a value of six percent and unemployment rising to 10 percent. What value does ν take?
(c) In the year after the oil shock, the value of ν returns to zero. What must happen to inflation to return the economy to the natural rate of unemployment?
Three different plans were presented to the US GAO (Government Accountability Office) by a high-technology facilities manager for operating a small weapons production facilities. Assuming that GAO could renew any of the plans under the same condition..
In perfect competition, where we determine optimal price, does the resulting P1 figure simply mean that when the market is at P1, the firm is maximizing it's efficiency?
a. What is the market equilibrium price and quantity? Sketch your answer as well as calculate it numerically.
Question: Risk attitude is an enterprise environmental factor that you should evaluate when performing the Plan Risk Management process. Risk attitude consists of all of the following elementsexceptfor which one?
Without markets A. a nation could better harness its comparative advantage. B. people would be less self-sufficient. C. specialization and the division of labor would increase. D. specialization and the division of labor would decrease.
Show that if the food stamps could be legally re-sold, the welfare of the household would be increased. Give one reason why food stamps should not be re-sold.
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Country X is a growing economy located in southeast Asia. Although it has a large population, it also has a disproportionately high number of working age people. A large English-speaking workforce and low labor costs make it a competitive outsourcing..
If the price elasticity of demand for a product is -5, and the income elasticity of demand for the product is 2.5. If a 0.5% decrease in product price as accompanied by a 1% decrease in consumer income, the firm's total sales will
Less-Developed Countries (LDCs) are caught in a vicious circle of poverty. For output to increase, they must build up capital. To build up capital, they must save and consume less than what they are producing. How should developed-countries and inter..
Draw a Phillips Curve. Explain why economists claimed that the Phillips Curve represented a menu of social choice. Do economists still believe in the menu view of the Phillips Curve? What view has replaced the original view?
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