Econ110B_prob1_answers - the best If you want a milder...

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ECON 110B Problem Set 1 Solutions Grant E. Johnson and Eul Noh January 2016 Chapter 9, exercise 4 (page 248) (a) Slope of the Phillips curve = 0.5 (b) Only in terms of the cumulative lost output, you can’t decide between the three. If you want a quick sharp recession and expect people will forget after three years, option 1 is
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Unformatted text preview: the best. If you want a milder recession, option 3 is the best. (c) Option 1 is the best. (d) The only way to lower inflation is to create a recession. Chapter 9, exercise 5 (page 248-245) (a) ↓ True output (b) ↓ Inflation (c) Central bank too optimistic ⇒↑ ˜ Y ⇒↑ π 1...
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