– PS8.pdf

FIND A SOLUTION AT Academic Writers Bay

EC1101 PROBLEM SET 8Instructor: Ines Vilela

Inflation, Unemployment and Monetary Policy

Problem 1 (20 marks)

Consider the following statement:

“The Phillips curve implies that when unemployment is high, inflation islow, and vice versa. Therefore, we may experience either high inflation orhigh unemployment, but we will never experience both together”.

Is this statement true, false or uncertain? Briefly explain.

Problem 2 (40 marks)

Answer the following questions and illustrate using the feasibility set (MRT) and thepolicymakers preferences (MRS).

(a) What would the policymaker’s indifference curves look like if the policymaker caredonly about low unemployment? Which point on the Phillips curve would that poli-cymaker choose?

(20 marks)

(b) What would the policymaker’s indifference curves look like if the policymaker caredonly about low inflation? Which point on the Phillips curve would this policymakerchoose?

(20 marks)

Problem 3 (40 marks)

Consider an economy in the medium-run equilibrium (where the wage-setting andthe price-setting curves cross). Suppose that more workers join trade unions, which in-creases their bargaining power against employers. Assume that the level of employmentand the labour supply remain constant in the short run.

(a) Using the labour market diagram show what happens to unemployment and realwages in the labour market in the medium run.

(20 marks)

(b) Using the bargaining gap concept, explain what happens to wages, prices and in-flation as the economy adjusts from the initial equilibrium to the new equilibrium.Show on the Phillips curve diagram what happens to inflation.

(20 marks)


Get help now

Order a similar assignment from
Click the link below to order now www.

is one of the most legit and reliable essay writing companies that offer academic help #

Hire an expert from to assist you handle your assignments.


Order from Academic Writers Bay
Best Custom Essay Writing Services


Why Choose Us?

  • non-plagiarized Papers
  • 24/7 /365 Service Available
  • Affordable Prices
  • Any Paper, Urgency, and Subject
  • Will complete your papers in 6 hours
  • On-time Delivery
  • Money-back and Privacy guarantees
  • Unlimited Amendments upon request
  • Satisfaction guarantee

How It Works

  • Click on the “Place Your Order” tab at the top menu or “Order Now” icon at the bottom and a new page will appear with an order form to be filled.
  • Fill in your paper’s requirements in the "PAPER DETAILS" section.
  • Fill in your paper’s academic level, deadline, and the required number of pages from the drop-down menus.
  • Click “CREATE ACCOUNT ; SIGN IN” to enter your registration details and get an account with us for record-keeping and then, click on “PROCEED TO CHECKOUT” at the bottom of the page.
  • From there, the payment sections will show, follow the guided payment process and your order will be available for our writing team to work on it.

About AcademicWritersBay.com

AcademicWritersBay.comnbsp;is an easy-to-use and reliable service that is ready to assist you with your papers 24/7/ 365days a year. 99% of our customers are happy with their papers. Our team is efficient and will always tackle your essay needs comprehensively assuring you of excellent results. Feel free to ask them anything concerning your essay demands or Order.

AcademicWritersBay.com is a private company that offers academic support and assistance to students at all levels. Our mission is to provide proficient andnbsp;high quality academic servicesnbsp;to our highly esteemed clients. AcademicWritersBay.com is equipped with competent andnbsp;proficient writersnbsp;to tackle all types of your academic needs, and provide you with excellent results. Most of our writers are holders ofnbsp;master's degreesnbsp;ornbsp;PhDs, which is an surety of excellent results to our clients. We provide assistance to students all over the world.
We provide high quality term papers, research papers, essays, proposals, theses and many others. Atnbsp;AcademicWritersBay.com, you can be sure ofnbsp;excellent gradesnbsp;in your assignments and final exams.

error: Content is protected !!