PhillipsCurve_Practice

PhillipsCurve_Practice - UNIVERSITY OF SOUTHERN CALIFORNIA...

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UNIVERSITY OF SOUTHERN CALIFORNIA Marshall School of Business BUAD 350: The Firm in the National Economy Fall 2006 Prof. Safarzadeh A practice on Chapters 8 and 9 theories Student Name: ________________ Answer the questions in the spaces provided. All the students are required to know how to solve questions 1, 3, 4 (a – d). This is a good practice for the quiz and tests. Questions 2 and 4 (e) count as extra credit questions. 1- Suppose that the Phillips curve is given as t - ∏ e t = -3(U t – U n ), where Ut = 8%, e t = t-1 , and t-1 = 3%. a. What is the natural rate of unemployment? b. Suppose the government uses fiscal policy to lower the unemployment to 6% a year and keeps it at that level. What will be the inflation rate at times t, t+1, t+2, and t+3? 2- Suppose that the Phillips curve is given as t - ∏ e t = -3(U t – U n ), where Ut = 8%, e t = Ө t-1 . Also suppose that Ө is initially equal to zero. a.
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PhillipsCurve_Practice - UNIVERSITY OF SOUTHERN CALIFORNIA...

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