03 Jun Question 1. In the late 1960s, Milton Friedman and Edm
Question
1. In the late 1960s, Milton Friedman and Edmund Phelps argued that there was not a
structural relationship between inflation and unemployment rates. In particular, the trade
off could only exist in the short -run.
a) (10 points) The tradeoff between unemployment and inflation was much
discussed throughout the 1960s as there appeared to be a clear tradeoff
between unemployment and inflation. In fact, we traced out the Phillips curve
beginning in the early 1960s and continuing through the end of the decade. In
the space below, recreate the Phillips curve that we constructed in the lectures,
being sure to label diagram completely. At minimum, you should have
unemployment / inflation combinations for 1961, 1962, 1964, 1966, and 1969.
Connect the dots and we have the tradeoff between unemployment and inflation
during the 1960s, aka, the Phillips curve.
b) (10 points) Now explain why the Phillips curve that you constructed can only be a
short-run phenomenon at best. In particular, explain exactly why, as we went
through the decade of the 1960s, we continuously move up and to the northwest
along the Phillips curve…. from relatively high rates of unemployment and low
inflation to relatively low rates of unemployment and high rates of inflation. In
your answer, make sure discuss the short run aspect of this curve and why, in
the long-run, the Phillips curve is vertical (hint: expected inflation, unexpected
inflation, actual real wages, and expected real wages should be a big part of your
explanation).
2. In this question, we are going dig deeper into the Taylor Rule and it variants
(modifications). You will need the following links to answer the following questions.
Note, each link takes you to a page where right above the graph on left, there is a
"download data in graph" tab – click on it and that will give you access to the data you
need.
NAIRU
GDP Growth
PGE
Inflation PCE core
Unemployment Rate
Inflation PCE
Effective Federal Funds Rate
As Taylor assumed, we assume the equilibrium real rate of interest, r* = 2% and the
optimal inflation rate, the target inflation rate is also equal to 2%.
1
Our website has a team of professional writers who can help you write any of your homework. They will write your papers from scratch. We also have a team of editors just to make sure all papers are of HIGH QUALITY & PLAGIARISM FREE. To make an Order you only need to click Ask A Question and we will direct you to our Order Page at WriteDemy. Then fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Fill in all the assignment paper details that are required in the order form with the standard information being the page count, deadline, academic level and type of paper. It is advisable to have this information at hand so that you can quickly fill in the necessary information needed in the form for the essay writer to be immediately assigned to your writing project. Make payment for the custom essay order to enable us to assign a suitable writer to your order. Payments are made through Paypal on a secured billing page. Finally, sit back and relax.
About Writedemy
We are a professional paper writing website. If you have searched a question and bumped into our website just know you are in the right place to get help in your coursework. We offer HIGH QUALITY & PLAGIARISM FREE Papers.
How It Works
To make an Order you only need to click on “Order Now” and we will direct you to our Order Page. Fill Our Order Form with all your assignment instructions. Select your deadline and pay for your paper. You will get it few hours before your set deadline.
Are there Discounts?
All new clients are eligible for 20% off in their first Order. Our payment method is safe and secure.