According to adaptive expectations, what happensto the inflation rate and the unemploymentrate in the following situations?a. Initially, the economy is operating at thenatural rate of 6 percent unemployment.The anticipated rate of inflation is6 percent, and the actual rate is also6 percent.b. In the next period, there is an unexpected risein the inflation rate to 10 percent.c. In the next period, there is an unexpected risein the inflation rate to 12 percent.

According to adaptive expectations, what happensto the inflation rate and the unemploymentrate in the following situations?a. Initially, the economy is operating at thenatural rate of 6 percent unemployment.The anticipated rate of inflation is6 percent, and the actual rate is also6 percent.b. In the next period, there is an unexpected risein the inflation rate to 10 percent.c. In the next period, there is an unexpected risein the inflation rate to 12 percent.

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter10: Aggregate Supply

Section: Chapter Questions

Problem 1.1P

See similar textbooks

Similar questions

1) Explain the trade off between inflation and output in macroeconomics. 2)Exlain why the government may/may not be able to just randomly implement policies to increase ouput.
Oil prices are on track to reach $100 a barrel this month for the first time in 2023 after surging by almost 30% sinceJune, after Russian and Saudi Arabian production cuts and rising demand from China.With many industries being heavily reliant on energy and transportation, what type of inflation would this leadto in South Africa?A. Demand-pull inflationB. Cost-push inflationC. StagflationD. HyperinflationWhat is one of the potential effects of the aforementioned inflation on the South African economy?A. Decreased purchasing power of money.B. Increased consumer savings.C. Reduced interest rates on loans.D. Higher demand for imports.
In a decelerating inflation environment (e.g. with inflation rate at 20%, 18%, 14%, .. year after year), using "adaptive inflation expectations" formation, the forecasted future inflation rate is likely to be O systematically biased upward. O systematically biased downward. O always correct. O about correct on average.
People are said to have rational expectations if they Select one: a. merely guess at the inflation rate b. assume that this year's inflation rate will be equal to the average inflation rate over the past 10 years O c. use all available information in forming their expectations about inflation O d. assume that this year's inflation rate will be the same as last year's inflation rate
Two main macroeconomic concerns are the problems of inflation andunemployment.a. What are the social costs of inflation? Explain TWO of them? b. What is natural rate of unemployment? Explain the TWO main causesof natural rate of unemployment. With reference specifically to ONEof these causes, suggest ONE practical government policy that reducesthe natural rate of unemployment.
Which of the following are CORRECT statements regarding inflation and real variables? Select ONLY THOSE THAT APPLY. Select 2 correct answer(s) If nominal interest rate is 10 percent, the inflation rate is 5 percent, and the tax rate is 30 percent, the real after-tax interest rate is 2 percent. Lower than anticipated inflation raises the real wage rate (adjusted for inflation) and workers gain at the expense of employers who lose. If the money wage rate is $30.00 an hour and the price level is 120, the real wage rate is $24.00.
Suppose that a borrower and a lender agree on thenominal interest rate to be paid on a loan. Theninflation turns out to be higher than they bothexpected.a. Is the real interest rate on this loan higher or lowerthan expected?b. Does the lender gain or lose from thisunexpectedly high inflation? Does the borrowergain or lose?c. Inflation during the 1970s was much higher thanmost people had expected when the decade began.How did this unexpectedly high inflation affecthomeowners who obtained fixed-rate mortgagesduring the 1960s? How did it affect the banks thatlent the money
Maps Paraphrasing Tool ... New Tab ent - Sem 2 2022.pdf 2 / 3 G Report Grammarly 100% + + » What is the current environment in the USA and Australia? b) Define unemployment and its measurement. What is the current environment in the USA and Australia? c) Define inflation and its measurement. What is the current environment in the USA and Australia? Question 2 Assume that an economy is initially operating at the natural rate of output (full employment output). Use the AD-AS model to illustrate graphically the effects on price and output of a increase in government spending and an increase in the cash rate. Explain your assumptions with respect to the range of aggregate supply of your analysis. Question 3 Explain in detail the process of Monetary Policy transmission of an increase in the cash interest rate. Use relevant graphs to describe how a Central Bank's action on the interest cash rate ripple through the economy and lead to the target policy goal. (Three connected diagrams should…
Which of the following is NOT one of the negative effects associated with inflation? O Menu costs, when producers need to constantly update prices to reflect the changing value of the dollar. O The negative impact on borrowers with fixed payments (like mortgage payments). O Shoe leather costs, the cost associated with consumers efforts to ajdust behavior to counter-act inflation. O The lowering of the purchasing power for individuals who hold large amounts of cash. Because of inflation, what happens to the value of the REAL minimum wage during periods of time when congress keeps the minimum wage constant (like it has been since 2009). O Since prices go up, real minimum wage decreases. O The value of the real minimum wage is determined by the level of effort put in by workers. If the congress is keeping the minimum wage constant, the real minimum wage is not changing. O The real minimum wage increases since inflation makes all prices increase.
Refer to the accompanying figure. LRAS Inflation a A 0, y' Output O O An economy is currently in long-run equilibrium at point B, at an inflation rate of m, which is too high to sustain economic growth. If an anti-inflationary policy is enacted, the economy will be in short-run equilibrium at point creating gap. O SRAS O SRAS AD' AD A; an expansionary A; a recessionary D; a recessionary D; an expansionary
Which of the following expectations will NOT increase spending? a. Employment b. Laying off c. Maturity of Investment d. Promotion
At full employment, the expected inflation rate is ... A. higher than the inflation rate B. equal to the inflation rate C. lower than the inflation rate D. unknown E. unrelated to the inflation rate