Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Microeconomics Expert

Consider an economy in long-run equilibrium with an inflation rate, π, of 12% (0.12) per year and a natural unemployment rate, u, of 6% (0.06). The expectations-augmented Phillips curve is
π = π^e - 2(u - u).

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.

a) Consider two-year disinflation. In the first year π = 0.04 and π^e = 0.08. In the second year π = 0.04 and π^e = 0.04. In the first year, what is the unemployment rate? By what percentage does output fall short of full-employment output? In the second year, what is the unemployment rate? By what percentage does output fall short of full-employment output? What is the sacrifice ratio for this disinflation?

b) Now consider a four-year disinflation according to the following table:

Year 1 2 3 4
π 0.08 0.04 0.04 0.04
π^e 0.10 0.08 0.06 0.04

What is the unemployment rate in each of the four years? By what percentage does output fall short of full-employment output each year? What is the sacrifice ratio for this disinflation?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M945684

Have any Question? 


Related Questions in Microeconomics

Assignment1perform an industry analysis for each of ibms

Assignment 1. Perform an industry analysis for each of IBM's top market segments: services, software, and hardware. Are these attractive industries? Why or why not? 2. Looking at IBM's RCCs, can IBM gain and sustain a co ...

Demonstrate how metrics such as valuation economic profit

Demonstrate how metrics such as valuation, economic profit, and related terms are measured and evaluated. Explain the significance and implications of various economic theories pertaining to profit, consumer choice, dema ...

Discussion questions1 firms made a come back by trimming

Discussion Questions 1) Firms made a come back by trimming costs, reducing unused capacity and increasing profits. List at least two issues in which they focus on. 2) What are the effects of nonperforming loans on a bank ...

1 explain the difference between explicit and implicit

1) Explain the difference between explicit and implicit costs of production. 2) Explain the reasoning behind the U-shaped, long-run, average cost curve. 3) Explain the law of diminishing marginal returns. 4) Describe eco ...

Assignment1 listidentify and discuss the various laws that

Assignment 1). List/identify and discuss the various laws that were broken. Identify and discuss ENRON's internal process of "Yank and Rank." What is meant by the term "cooking the books?" 2). List/identify and discuss t ...

Questiondescribe the sydney entrepreneur ecosystem by

Question: Describe the Sydney entrepreneur ecosystem by identifying each component and providing a list and one-sentence description of players in each component. Within the category of investors or startups there are to ...

Assignmentutilizing tools such as google scholar and scirus

Assignment Utilizing tools such as Google Scholar and Scirus locate the following: • An article advocating centralized management of the IT function; • An article advocating user-dominated management of IT. Discuss your ...

Question 1 suppose you are given the following information

Question 1: Suppose you are given the following information about an industry: Q D = 8000 - 100p; Q S SR = 20 + 700p; c(q) = 20 + q 2 /20. where q and c (q) stand for a firm's quantity supplied and cost function; Q S SR ...

Digital media power point presentationdigital media has

Digital Media Power point presentation Digital media has changed the ways ideas, information, and arguments in society are communicated both locally and globally. Individuals and organizations frequently use digital medi ...

Assignment1in homework 1 we solved the equilibrium in the

Assignment: 1. In homework 1 we solved the equilibrium in the beer market represented by the following supply and demand functions: Q d = 20 - 4p +2p w + 3Y + 15HOLIDAY Q s = -4 + 26p - 2p g - 1p t Q = pints of beer (in ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate