Assume that expected inflation is based on the

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Chapter 8 / Exercise 2
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
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20) Assume that expected inflation is based on the following: πet=θπt-1. An increase in θwill cause: 20) ______ A) inflation in period t to be more responsive to changes in unemployment in period t B) a reduction in the natural rate of unemployment C) no change in the natural rate of unemployment D) an increase in the natural rate of unemployment
21) Which of the following is one possible explanation for the change in the natural rate of unemployment in the United States during the 1970s? 21) ______
22) Assume that expected inflation is based on the following: πet=θπt-1. If θ=0, we know that: 22) ______
23) When inflation has been persistent, as was the case in the United States during the 1970s, low unemployment rates will likely be associated with 23) ______
24) Which of the following will most likely cause a change in the natural rate of unemployment? 24) ______ A) changes in fiscal policy. B) changes in expected inflation. C) changes in monetary policy. D) all of the above. E) none of the above.
25) An increase in the price of oil will likely cause which of the following? 25) ______
ESSAY. Write your answer in the space provided or on a separate sheet of paper. 26) Explain how changes in the proportion of contracts that are indexed affect how a given change in monetary policy will affect economic activity.
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Chapter 8 / Exercise 2
Applied Calculus for the Managerial, Life, and Social Sciences
Tan
Expert Verified
27) Based on your understanding of the Phillips curve, is it possible for the unemployment rate to increase while inflation increases? Explain. 28) Based on your understanding of the Phillips curve, explain what happens to actual inflation (relative to expected inflation) when the actual unemployment rate is either above or below the natural rate of unemployment. 29) During which decade did the original Phillips curve break down? Also, briefly explain why the original Phillips curve broke during this period. 30) Explain what is meant by the "wage-price" spiral.
1) 2) 3) 4) 5) 6) 7) 8) 9) 10) 11) 12) 13) 14) 15) 16) 17) 18) 19) 20) 21) 22) 23) 24) 25) 26) An increase in nominal money growth will increase the real money supply causing an increase in economic activity.
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