Question

Consider an economy with a natural unemployment rate, u, of 4%. The expectations-augmented Phillips curve is Assume that Okun's Law holds so that a 1 percentage point increase in the unemployment rate maintained for one year reduces GDP by 2% of full employment output. Note: Okun's Law can be expressed as: 2( u-u) a. Consider a two-year disinflation. In the first year actual inflation, π' is 14% and expected inflation, π.s 18%. What is the first year unemployment rate? % Enter your response as a percentage rounded to one decr al place An economy has the following AD and AS curves: Y-800 . 501笥 ADarve: Y = Y + [10 x (P-Pe)] AS curve: Let Y = 2,000 and M-1200. Suppose that P = 50 a. Calculate the equilibrium value of the price level, P. P-(Round your answer to two decimal places.) Consider the following economy: Cd = 270 + 0.70(Y-T)-520r Desired consumption: Desired investment Real money demand: Full-employment output: Expected inflation : = 270-460r L = 0.6Y-470i Y=1,030 This is a classical model with no misperceptions about the price level a. Suppose that T= G = 190 and that M= 7,650. The equation describing the IS curve is IS: Y= 1990-3267r The equation describing the LM curve is LM: Y= 127501 + 783r. Using the IS and LM equations, the equation for the aggregate demand curve that shows the relationship between Y and P is. AD: Y 385 +10285 In general equilibrium, output = 1,030, the price level-15.94, the real interest rate-29.38%, consumption = 7052, and investment = 134.9 b. Suppose that the money supply rises to 9,150. What is the new equation for the AD curve? (Enter each response rounded to the nearest whole number.)

Answer 1

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