Examination Aids allowed
... national income is at the full employment level: the AD, SAS and LAS curves intersect all at one point. Now suppose that there occurs a negative supply shock such as ‘oil shocks’. What will happen to the price level and the national income of the economy in the short-run as well as in the long-run? ...
... national income is at the full employment level: the AD, SAS and LAS curves intersect all at one point. Now suppose that there occurs a negative supply shock such as ‘oil shocks’. What will happen to the price level and the national income of the economy in the short-run as well as in the long-run? ...
Unemployment and Inflation Recession
... of unemployment does not mean that the entire country or province has the same rate. ...
... of unemployment does not mean that the entire country or province has the same rate. ...
Chapter 6. The Labor Market
... The real wage is unaffected by the business cycle in the model of this chapter. Given the labor only, constant returns to scale production function, the real wage is always determined by the price-setting relation, regardless of whether P=Pe. Thus, the real wage is always determined by the degree of ...
... The real wage is unaffected by the business cycle in the model of this chapter. Given the labor only, constant returns to scale production function, the real wage is always determined by the price-setting relation, regardless of whether P=Pe. Thus, the real wage is always determined by the degree of ...
Unemployment Rate - The University of Chicago Booth School of
... What are the definitions of the major economic expenditure components? What are the trends in these components over time? What is the difference between ‘Real’ and ‘Nominal’ variables? How is Inflation measured? Why do we care about Inflation? What have been the predominant relationships between Inf ...
... What are the definitions of the major economic expenditure components? What are the trends in these components over time? What is the difference between ‘Real’ and ‘Nominal’ variables? How is Inflation measured? Why do we care about Inflation? What have been the predominant relationships between Inf ...
Speech to the Money Marketeers of New York University
... other words, housing remains a significant drag on the economy and a source of uncertainty in the outlook—much as it has for some time now. However, two other developments have changed the risk profile of the economy. The first is something of a positive, in that the auto sector now appears poised t ...
... other words, housing remains a significant drag on the economy and a source of uncertainty in the outlook—much as it has for some time now. However, two other developments have changed the risk profile of the economy. The first is something of a positive, in that the auto sector now appears poised t ...
Economics 104B, Section 41 Instructor: Tara Sinclair
... You will gain and your friend will lose. Because you set the real interest rate on your loan (r) equal to 0, you must have set the nominal interest rate (i) equal to the inflation rate (π). If inflation turns out to be lower that what you expected, the actual real interest rate (r) will be positive ...
... You will gain and your friend will lose. Because you set the real interest rate on your loan (r) equal to 0, you must have set the nominal interest rate (i) equal to the inflation rate (π). If inflation turns out to be lower that what you expected, the actual real interest rate (r) will be positive ...
Chapter 10
... • Rapid depreciation of the currency, which raises the domestic cost of imported raw materials, combined with wage indexation ...
... • Rapid depreciation of the currency, which raises the domestic cost of imported raw materials, combined with wage indexation ...
Homework #5 - Answers Macro Policy Analysis Due Mar 25
... monetary policy in terms of the rate of growth of the money supply, rather than just its level. (If you want these equations to make the most sense, think of M, P, Pe , and perhaps even Y, as being the logarithms of the respective variables.) Note that the simple expectations mechanism just sets an ...
... monetary policy in terms of the rate of growth of the money supply, rather than just its level. (If you want these equations to make the most sense, think of M, P, Pe , and perhaps even Y, as being the logarithms of the respective variables.) Note that the simple expectations mechanism just sets an ...
The short run AS curve
... As AD shifts to the right, this also gives rise to P. This results in rising inflation expectation for the future Higher expected inflation raises wage claims Short run AS shifts to the left Short run AS keeps shifting leftwards until GDP above its long-run ...
... As AD shifts to the right, this also gives rise to P. This results in rising inflation expectation for the future Higher expected inflation raises wage claims Short run AS shifts to the left Short run AS keeps shifting leftwards until GDP above its long-run ...
Inflation is
... Drawing on the analysis of Friedman and Phelps, rational expectations (which is attributed to Lucas, Sargent and Barro) claims that the short-run cost of reducing inflation will be related to the speed with which inflationary expectations adjust. Rational expectations implies that the sacrifice rati ...
... Drawing on the analysis of Friedman and Phelps, rational expectations (which is attributed to Lucas, Sargent and Barro) claims that the short-run cost of reducing inflation will be related to the speed with which inflationary expectations adjust. Rational expectations implies that the sacrifice rati ...
Workshop 6 The Building Blocks of Macroeconomics
... Gross domestic product (GDP) is the market price of all final goods and services produced in one year. It is the most important measurement of production and output. ...
... Gross domestic product (GDP) is the market price of all final goods and services produced in one year. It is the most important measurement of production and output. ...
ECONOMIC ENVIRO NMENT answers.d oc
... b) Why should governments be worried with deflation? (5 marks) a. Yes as it slows down economic performance; its more worrisome in cases where this is not a deliberate government policy. c) Mention any two major conflicts between macroeconomic objectives? (6 marks) a. Healthy growth and low inflatio ...
... b) Why should governments be worried with deflation? (5 marks) a. Yes as it slows down economic performance; its more worrisome in cases where this is not a deliberate government policy. c) Mention any two major conflicts between macroeconomic objectives? (6 marks) a. Healthy growth and low inflatio ...
problem set 4 - Shepherd Webpages
... For each of the following, determine whether the aggregate demand curve shifts or the short-run aggregate supply curve shifts. Draw a separate graph to illustrate each situation (Mark the initial equilibrium so that all three curves cross at the full-employment output). Show clearly what happens to ...
... For each of the following, determine whether the aggregate demand curve shifts or the short-run aggregate supply curve shifts. Draw a separate graph to illustrate each situation (Mark the initial equilibrium so that all three curves cross at the full-employment output). Show clearly what happens to ...
price level
... i. The question you must consistently ask yourself is: in the longrun, what should happen? Should real GDP change or only the price level? XII. Fall into the Gap a. If you shift just one curve, the economy shows an imbalance. Rather than three lines intersecting on the same point, three lines will i ...
... i. The question you must consistently ask yourself is: in the longrun, what should happen? Should real GDP change or only the price level? XII. Fall into the Gap a. If you shift just one curve, the economy shows an imbalance. Rather than three lines intersecting on the same point, three lines will i ...
Macro Economic Analysis
... 34. Inflation represents: (a) fall in price level (b) increase value of money (c) decrease value of money (d) None 35. Who told Inflation is too much of money chasing too few goods: (a) Coulbourn (b) Keynes (c) Friedman (d) Samuelsson 36. Among the following which is not a feature of inflation? (a) ...
... 34. Inflation represents: (a) fall in price level (b) increase value of money (c) decrease value of money (d) None 35. Who told Inflation is too much of money chasing too few goods: (a) Coulbourn (b) Keynes (c) Friedman (d) Samuelsson 36. Among the following which is not a feature of inflation? (a) ...
Chapter 7
... • If the government collects a tax on a worker’s wage: – The labor supply curve shifts left. – A worker receives less money and supplies less labor—this applies to any wage. – In order to be in equilibrium, firms must raise wages. ...
... • If the government collects a tax on a worker’s wage: – The labor supply curve shifts left. – A worker receives less money and supplies less labor—this applies to any wage. – In order to be in equilibrium, firms must raise wages. ...
The model of aggregate supply and aggregate demand in the short
... (1) Real GDP in Korea fluctuates around its average rate of growth. (2) The fluctuations in output are called the business cycle. (3) The business cycle is regular and predictable. (4) During 2009, Korean economy experienced an economic recession. (5) Economists generally believe that output moves t ...
... (1) Real GDP in Korea fluctuates around its average rate of growth. (2) The fluctuations in output are called the business cycle. (3) The business cycle is regular and predictable. (4) During 2009, Korean economy experienced an economic recession. (5) Economists generally believe that output moves t ...
Global Overview: Inflation as an Investment Tool
... well above that “180-200 bpm heart rate” analogy that we described as being in the general range of “healthy” for a person under periods of significant physical exertion. Given the significantly higher inflation rate of India vs. Brazil, we are likely to invest in Brazil before India, but changes in ...
... well above that “180-200 bpm heart rate” analogy that we described as being in the general range of “healthy” for a person under periods of significant physical exertion. Given the significantly higher inflation rate of India vs. Brazil, we are likely to invest in Brazil before India, but changes in ...
Price level (P) Real GDP (Y) B′ Note that output (Y) has not
... production would rise, and the economy would move to point D, the new intersection of the AD and SAS curves. But at D the workers are upset again: the price level increase has outstripped the nominal wage rate increase, and the real wage is again down. They bargain up the nominal wage. The end of th ...
... production would rise, and the economy would move to point D, the new intersection of the AD and SAS curves. But at D the workers are upset again: the price level increase has outstripped the nominal wage rate increase, and the real wage is again down. They bargain up the nominal wage. The end of th ...
Solutions to PSET 4 1. Why does the AS curve slope up, at least in
... 1. Why does the AS curve slope up, at least in the short run? Some argue that the AS curve is always vertical. What is this argument? The aggregate supply curve describes the relationship between the price level and the total quantity of output produced by firms. Because firms have market power (as ...
... 1. Why does the AS curve slope up, at least in the short run? Some argue that the AS curve is always vertical. What is this argument? The aggregate supply curve describes the relationship between the price level and the total quantity of output produced by firms. Because firms have market power (as ...
Phillips curve
In economics, the Phillips curve is a historical inverse relationship between rates of unemployment and corresponding rates of inflation that result in an economy. Stated simply, decreased unemployment, (i.e., increased levels of employment) in an economy will correlate with higher rates of inflation.While there is a short run tradeoff between unemployment and inflation, it has not been observed in the long run. In 1968, Milton Friedman asserted that the Phillips Curve was only applicable in the short-run and that in the long-run, inflationary policies will not decrease unemployment. Friedman then correctly predicted that, in the upcoming years after 1968, both inflation and unemployment would increase. The long-run Phillips Curve is now seen as a vertical line at the natural rate of unemployment, where the rate of inflation has no effect on unemployment. Accordingly, the Phillips curve is now seen as too simplistic, with the unemployment rate supplanted by more accurate predictors of inflation based on velocity of money supply measures such as the MZM (""money zero maturity"") velocity, which is affected by unemployment in the short but not the long term.