Tutorial 5q

# Tutorial 5q - ECO2004S TUTORIAL 5 CHAPTER 8 9 For Hand-in...

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ECO2004S TUTORIAL 5 CHAPTER: 8 & 9 For Hand-in: Questions 1 - 3 Chapter 8 Question 1 a. State the original Phillips curve relation and explain all the variables in the equation. (3) b. Explain what is meant by a wage-price spiral in 50 words or less (3) c. Why did the original Phillips curve relationship breakdown in the 1970’s? Give two reasons in less than 40 words. (4) d. Explain the term stagflation in less than 10 words. (1) e. How can the natural rate of unemployment change? Describe in less than 20 words. (2) f. Name three types of inflation that economists distinguish between. Which of the three depends primarily on peoples’ confidence in the central bank’s promises? (4) [17 Marks] Question 2 Consider the following equation for the expectations-augmented Phillips curve: π t – π t-1 = α(u t – u n ) a. Explain all the variables in the equation. (3) b. What is π t-1 being used as an estimate of? Explain the defence for this simplification in 10 words or less. (2)

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## This note was uploaded on 05/23/2011 for the course ECON 203 taught by Professor Jules during the Spring '11 term at University of Cape Town.

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Tutorial 5q - ECO2004S TUTORIAL 5 CHAPTER 8 9 For Hand-in...

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