Chapter 11 Macroeconomic Equilibrium in The Short Run Paper

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- Macroeconomic Equilibrium in the Short Run

- Output, Employment and Inflation

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Chapter 11: Macroeconomic Equilibrium in the Short Run Question1 In reality, tax revenues are not exogenous, but move positively with income (GDP). Suppose that T = 𝑇̅ + tY, where t is an exogenous tax rate. Use this tax revenue function to derive the government spending multiplier in the following simple model: C = c + c1(Y – T) I = 𝐼̅ G = 𝐺̅ NX = NX0 -mY Question 2 Derive the IS curve for the economy in the above exercise, with I = 𝐼̅– 20i. Plot it in (Y, i) space. Chapter 13: Output, Employment and Inflation Question 3 A Philips curve is represented by the following relationship: Ο€ = πœ‹Μƒ – 10(U – π‘ˆΜ…) + s, where s is a supply shock term, on average equal to zero. Draw the Phillips curve when π‘ˆΜ… = 7% and underlying inflation πœ‹Μ… = 3% and 6%. Okun’s Law is U – π‘ˆΜ… = -0.5 (Y – π‘ŒΜ…)/π‘ŒΜ…. Draw the aggregate supply schedule when π‘ŒΜ… = 10,000. Question 4 Using the conditions of the above exercise, show the impact of supply shocks s = 5%, and s = -2%. Separately show the effect of raising π‘ŒΜ… to 10,200. Why is it argued that improving the performance of the supply side of the economy is good for both inflation and employment?
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I included also an excel file with all the calculations for the 11 graphsPlease let me know if there is anything needs to be c...


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