ECON 2010-Final Exam

ECON 2010-Final Exam - 11-23-09Unemployment &...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 11-23-09Unemployment & Inflation Trade-off-Phillips curve: curve showing the SR relationship between UE rate & inflation rate-**fig. 28.1**The Short Run & Long Run Phillips Curves-How does a vertical LR Phillips curve affect monetary policy?o**fig. 28.7**oUnderstanding there exist levels of low UE that will increase inflation, & levels of high UE that decrease inflation, there will be an UE level that wont create any pressure on inflationoNonaccelerating inflation rate of UE (NARIU): UE rate where it has no tendency to increase/decrease inflation rateRational Expectations of the Inflation Rate-Earlier it was put forth that SR PC demonstrated an inflationUE tradeoff-This suggest a possibility for buying reduced UE w/inflationary monetary policy-Suppose workers (especially labor groups) & businesses incorporate all available info into their decision process; these players understand econ. policy actions & have a reasonable ability to foretell pd. Of inflation-Would they not become less susceptible to unanticipated inflation?Rational Expectations-By incorporating rational expectationsthat isexpectations formed by using all available info about an econ. variablethe bump from inflation may disappear-One might imagine if any central bank practiced this policy for long, the policy would become fully anticipated-Reality is likely between the two scenarios-**fig. 28.8**Rational Expectations of Inflation & Monetary Policy...
View Full Document

Page1 / 4

ECON 2010-Final Exam - 11-23-09Unemployment &...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online