Unformatted text preview: 2% of fullemployment output. The expectationsaugmented Phillips curve is given by: & = & e & 2 : 5 ( u & : 05) Consider a twoyear disin±ation. In the ²rst year, & = 0 : 06 and & e = 0 : 08 . In the second year, & = 0 : 04 and & e = 0 : 05 . (a) In the ²rst year, what is the value of the unemployment rate? (b) In the ²rst year, by what percentage does output fall short of fullemployment output? (c) In the second year, what is the value of the unemployment rate? (d) In the second year, by what percentage does output fall short of fullemployment output? (e) What is the sacri²ce ratio for this disin±ation? 4. Question Two from Abel et.al., Chapter 12, analytical problems 5. Question Six from Abel et.al., Chapter 12, analytical problems 1...
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 Spring '07
 MBIEKOP
 Economics, Macroeconomics

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