2010_Econ%20110A%20blanchard%204e%20Ch%209%20HomeworkQuestions

2010_Econ%20110A%20blanchard%204e%20Ch%209%20HomeworkQuestions

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

View Full Document Right Arrow Icon
Econ 110A Ch 9 Homework Questions Please, do not use a calculator or any other devices such as cell phones or computers. 1.Consider the Okun's law relation: u t - u t-1 = -β(g yt – 3%). The magnitude of β is typically A. greater than one. B. equal to one. C. less than one. 2. The reason for the answer to question 1 is A. labor hording. B. productivity increase. C. natural unemployment For questions 3-4, consider the three equations: u t - u t-1 = -.5(g yt – 3%), π t - π t-1 = -(u t - u n ), and g yt = g mt - π t. Assume that at t = 0, the economy is in the medium-run equilibrium with g y = 3%, u n =5%, π =4%, g m = 7%, and real money growth rate= g m - π =3%. Assume that at t=1, the Fed sets the real money growth rate at g m - π = 1%. 3. What is the unemployment rate at t = 1? A. 5%. B. 6%. C. 6.5%. D. 7%. E. 7.5%. F. 8%. 4. What is the inflation rate at t = 1? ……………………………………………………………………………………………………….
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 5. One implication of the Lucas critique is that A .it takes a long time for a reduction in money growth to reduce the inflation rate. B. unemployment rate actually does not have to be higher to lower inflation. C. unemployment will always be above its natural rate in the short run. D. the sacrifice ratio should be relatively high. 6. If money growth in period t is 6% and inflation in period t is 1%, A. output growth is 5% in period t. B. u t > u n. C. u t < u n D. the inflation rate will decrease in the next period. E. the inflation rate will increase in the next period 7. The normal growth rate of output A. equals zero. B. is positive. C. has increased over time. D. has decreased over time. 8. Explain the reason for the answer to question 3. Answer Key 1. C. 2. A 3. B 4. A 5. B 6. A. 7. B 8. At t = 1, g y = g m- π = 1%. Then, u t- u t-1 = -.5(1 – 3%) = 1 u t = u t-1 + 1 = u n + 1 = 5 + 1 = 6%....
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern