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Author Question: A key property of a Diamond-Dybvig bank is A) it is well-diversified. B) it lends to borrowers. ... (Read 83 times)

joe

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on: Jun 30, 2018
A key property of a Diamond-Dybvig bank is
 
  A) it is well-diversified.
  B) it lends to borrowers.
  C) it provides benefits very different from the provision of insurance.
  D) it trades with other banks.

Question 2

A. W. Phillips' 1958 paper examined unemployment and wage growth. What role, if any, does wage growth play in the modern Phillips curve?
 
  What will be an ideal response?


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Expo

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Reply #1 on: Jun 30, 2018
Answer to Question 1

A

Answer to Question 2

The modern Phillips curve relates unemployment to inflation, rather than wages. This allows inclusion of expected inflation and price shocks as causes of inflation, in addition to the unemployment gap. But the central idea remains that changes in inflation are driven by wage changes. When wages are sticky, then unemployment gaps have a small impact on inflation, while flexible wages cause large changes in inflation.


joe

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Reply #2 on: Jun 30, 2018
Thank you


Expo

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Reply #3 on: Jun 30, 2018
No problemo


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