979804110 - Intermediate Macroeconomics Econ 303 Assignment...

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Intermediate Macroeconomics: Econ 303 Assignment 3 [Due on 30 th June] FIRST NAME: LAST NAME: Total: 70 points. Note: Get a print out of this document and provide your answers in the space provided. I Numerical Analysis [20 Points] 1. (a) Suppose the sacrifice ratio is 4, then how much real GDP must be forgone to reduce inflation from 4% to 2% percentage point? (b) In the above scenario what is the impact on unemployment if okun’s law is correct? 2. The Phillips curve in Lowland takes the form of π = 0 . 04 - 0 . 5( u - 0 . 05), where π is the actual inflation rate and u is the unemployment rate. The Phillips curve in Highland takes the form of π = 0 . 08 - 0 . 5( u - 0 . 05). The current unemployment rate in both countries is 9 percent (0.09). (a) Explain the similarities in the Phillips curves in Highland and in Lowland. (b) Explain the difference in the Phillips curves in Highland and in Lowland. (c) In which country will policymakers face a bigger trade-off if they try to reduce unemploy- ment in the short run? Why?
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II Graphical [30 Points] 3. Central Bank A conducts monetary policy according to the following monetary policy rule:
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