This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Assume expectations of prices are correct but expectations of productivity adjust slowly. Use the ... (Read 93 times)

roselinechinyere27m

  • Hero Member
  • *****
  • Posts: 557
on: Jun 30, 2018
Assume expectations of prices are correct but expectations of productivity adjust slowly. Use the PS/WS relations, graphically illustrate and explain the effects of a decrease in productivity growth on the natural rate of unemployment.
 
  What will be an ideal response?

Question 2

Use the market for central bank money to answer this question. Graphically illustrate and explain what effect a Federal Reserve purchase of bonds will have on this market and on the equilibrium interest rate.
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

huda

  • Sr. Member
  • ****
  • Posts: 304
Reply #1 on: Jun 30, 2018
Answer to Question 1

The PS relation shifts up by a factor A. The WS relation shifts up by a factor Ae. If Ae>A, the PS curve shifts up by less than the WS relation shifts up, leading to an increase in the natural rate of unemployment for some time.

Answer to Question 2

A Fed purchase of bonds will cause an increase in the supply of central bank money. To restore equilibrium in this market, the interest rate will have to fall. As it does, the quantity demanded for central bank money will rise and, therefore, restore equilibrium.


roselinechinyere27m

  • Member
  • Posts: 557
Reply 2 on: Jun 30, 2018
Wow, this really help

sultansheikh

  • Member
  • Posts: 335
Reply 3 on: Yesterday
Great answer, keep it coming :)

« previous next »
 

Did you know?

Limit intake of red meat and dairy products made with whole milk. Choose skim milk, low-fat or fat-free dairy products. Limit fried food. Use healthy oils when cooking.

Did you know?

Astigmatism is the most common vision problem. It may accompany nearsightedness or farsightedness. It is usually caused by an irregularly shaped cornea, but sometimes it is the result of an irregularly shaped lens. Either type can be corrected by eyeglasses, contact lenses, or refractive surgery.

Did you know?

Essential fatty acids have been shown to be effective against ulcers, asthma, dental cavities, and skin disorders such as acne.

Did you know?

Though the United States has largely rejected the metric system, it is used for currency, as in 100 pennies = 1 dollar. Previously, the British currency system was used, with measurements such as 12 pence to the shilling, and 20 shillings to the pound.

Did you know?

Interferon was scarce and expensive until 1980, when the interferon gene was inserted into bacteria using recombinant DNA technology, allowing for mass cultivation and purification from bacterial cultures.

Areas of differing productivity and diversity in a wetland. (a) Typha dominates core habitats, while Areas of differing productivity and diversity in a wetland. (a) Typha dominates core habitats, while
Areas of differing productivity and diversity in a wetland. (a) Typha dominates core habitats, while Areas of differing productivity and diversity in a wetland. (a) Typha dominates core habitats, while
Use of diopter to adjust for problems of refraction Use of diopter to adjust for problems of refraction
Polar Ocean Productivity Polar Ocean Productivity
Productivity in Temperate Oceans – Northern Hemisphere Productivity in Temperate Oceans – Northern Hemisphere
A(n) _____ is a spur-of-the-moment question. Fill in the blank(s) with correct word A(n) _____ is a spur-of-the-moment question. Fill in the blank(s) with correct word
Video: Requirements for nervous signals

For a complete list of videos, visit our video library